Wall Street Bets On Trump

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

Last week’s upward momentum showed no signs of letting up as the rally continued today with the major indexes adding over +0.5%. The conviction is that Trump’s promised tax cut will be a boon to the economy. While that may be true, the open question as to not only its feasibility, but also its timely implementation, remains the big unknown. As usual, hope and reality are very much disconnected on Wall Street.

Nevertheless, the bulls are in charge and Trump has been working more like a business executive rather than a politician by reaching out to influential world leaders by phone, while concurrently holding high profile meetings with executives ranging from automakers to technology companies.

While economic data points appear disconnected from the stock market, the S&P 500 companies are on track for their best profit growth in 9 quarters. On deck is Fed chief Yellen’s annual testimony on Capital Hill tomorrow and Wednesday, which hopefully clarifies interest rate policy as it is uncertain whether more hikes during 2017 will actually materialize.

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One Man’s Opinion: Grant Williams: A Punch In The Face For Central Bankers Is Coming

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By Adam Taggert

Grant Williams, publisher of the economic blog Things That Make You Go Hmmm and principal of Real Vision TV, returns to the podcast this week to discuss his expectation of a return of volatility to the markets.

Grant warns that over the past seven years, the various financial markets around the globe have melded into a single world market dominated by trading algorithms and the central banks. This new system only knows how to operate effectively in one direction: Up.

Grant is very concerned that a return of volatility will act as a wrench tossed into the gears, quickly throwing the world financial system into panic.

I’ve spent a lot of time thinking about the incredible amount of counter-intuitive moves that we see in markets.  It’s all inextricably linked to the rise of computer trading.

Once you get momentum, markets start going up based on the back of algorithms. Then we start to see the day traders coming on the back of it, and everyone starts to gain confidence.

Markets are global now. There really is only one equity market around the world, certainly when they’re going up. We’ll see when markets turn and start to go down. And I think that’s definitely something we need to talk about because I suspect it will be very, very different market action when this trend turns.

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ETFs On The Cutline – Updated Through 02/10/2017

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Below please find the latest High Volume ETFs Cutline report, which shows how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs are positioned.

This report covers the HV ETF Master List from Thursday’s StatSheet and includes 366 High Volume ETFs ETFs, defined as those with an average daily volume of more than $5 million, of which currently 239 (last week 228) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line (%M/A) from those that have dropped below it.

Take a look:

The HV ETF Master Cutline Report            

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms.

If you missed the original post about the Cutline approach, you can read it here.

ETF Tracker Newsletter For February 10, 2017

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ETF Tracker StatSheet

https://theetfbully.com/2017/02/weekly-statsheet-etf-tracker-newsletter-updated-02092017/

Trump’s Tax Talk Boosts Markets

[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

Yesterday’s theme of renewed optimism caused by Trump’s tax talk continued through today’s session with the major indexes rising to all-time closing highs, although the gains were less than the day before. The only fly in the ointment was that volumes have decreasing as the indexes have been rising, which makes this rally a little suspect.

Additionally, volatility for the S&P 500 has been crushed to its lowest in 10 years; we have now had 85 days in a row without a 1% drop, 44 days without a 1% close to close gain or loss and 39 days without a 1% intra-day swing. These are not signs of a normal market but of a manipulated market.

Nevertheless, the bullish trend continues for the time being with today’s support coming from a spike in oil prices, which pushed the energy sector higher. All eyes continue to be on Trump next week as we are sure to see more announcements, some of which may give a further assist to the equity markets.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 02/09/2017

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ETF Data updated through Thursday, February 9, 2017

Methodology/Use of this StatSheet:

  1. From the universe of over 1,800 ETFs, I have selected only those with a trading volume of over $5 million per day (HV ETFs), so that liquidity and a small bid/ask spread are assured.
  2. Trend Tracking Indexes (TTIs)

Buy or Sell decisions for Domestic and International ETFs (section 1 and 2), are made based on the respective TTI and its position either above or below its long-term M/A (Moving Average). A crossing of the trend line from below accompanied by some staying power above constitutes a “Buy” signal. Conversely, a clear break below the line constitutes a “Sell” signal. Additionally, I use a 7.5% trailing stop loss on all positions in these categories to control downside risk.

  1. All other investment arenas do not have a TTI and should be traded based on the position of the individual ETF relative to its own respective trend line (%M/A). That’s why those signals are referred to as a “Selective Buy.” In other words, if an ETF crosses its own trendline to the upside, a “Buy” signal is generated. Since these areas tend to be more volatile, I recommend a wider trailing sell stop of 7.5% -10% depending on your risk tolerance.

If you are unfamiliar with some of the terminology, please see Glossary of Terms and new subscriber information in section 9.

 

  1. DOMESTIC EQUITY ETFs: BUY — since 4/4/2016

Click on chart to enlarge

Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in the above chart) is positioned above its long-term trend line (red) by +2.39% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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One Promise Drives Major Indexes To Record Highs

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

The stagnated rally of the past few days, during which Wall Street was looking for more details about Trump’s agenda, was revived today when he stepped up to the plate and said that “he would make a major tax announcement in a few weeks.” He also added that “lowering the overall tax burden on American business is big league” without giving any further indication as to what this might entail.

That’s all it took, and the major indexes scored a triple with all three of them gaining over +0.5% for the session. Financials performed the best by gaining +1.4% and were closely followed by energy with +0.9%, while the conservative utilities sector gave back -0.8%.

Trump’s announcement overrode even poor earnings news from Twitter (-12.3%), Intel (-2.5%) and Coca Cola (-1.8%). Bonds sold off as interest rates rose with the US-10 year yield gaining 6 basis points to 2.40%, as the 30-year bond yield spiked back above the 3% level to end at 3.02%.

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