Dollar Slumps And Gold Jumps

Ulli Market Commentary Contact

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

It was a mixed news bag as the housing recovery showed signs of “un-recovering” with Housing Starts dropping 2.6% in April after getting hammered in March with a 6.6% reduction. Not to be outdone, Building Permits joined in by tumbling 2.5% MoM, way below expectations.

On the retail side, the apocalypse continued as clothing retailer Rue21 filed for bankruptcy last night. Restructuring and streamlining is on the agenda translating to about 400 store closings (out of 1,179). Rating agency Fitch expects a flood of future defaults and has now eleven retailers on its concern list. Well, as I reported before, we are well on our way to the forecast 8,000 plus store closings for 2017.

The US dollar has been slipping and sliding for 5 days in a row and has now erased all post-election gains. The question remains as to whether we will see another rebound after testing these lows for the 3rd time in the past 2 months, ever since Trump commented on the “too-strong dollar.” The beneficiary of this weakness has been gold, which has been rallying for 5 days in a row.

I keep talking about the low levels of the VIX (Volatility Index), which has market participants in a sleepy state of complacency as it supports the narrative that markets can only go one way—and that is up. The VIX set a new record by having closed 17 consecutive days in a row below 11, which has never happened before! That is unbelievable and certainly not sustainable.

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Weak Global Economic Data = Markets Racing To New Highs

Ulli Market Commentary Contact

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

The S&P 500 finally managed to break through its 2,400 glass ceiling to new all-time highs while the Nasdaq joined the fun by closing in record territory as well. Supporting actors were Johnson & Johnson, along with Cisco, both of which rallied more than 2%.

Today’s gain came in the face of the biggest global cyber attack in history, which struck over 100 nations but left the US mainly unaffected. The attack was focused on the old Windows operating systems, like XP and Vista, which Microsoft has not been supporting in many years and which are lacking up to date security measures. To me, it’s hard to believe that some governments and corporations are still operating using outdated platforms from an era that did not have to deal with the type of sophisticated hacking/spying software available these days.

In regards to world economies, not only did Chinese data disappoint, Europe showed negative numbers as well and US data was dismal, all of which sent the global macro surprise index (shown below) to its lowest since November. Ah yes, in this new normal environment, these are perfect reasons for the markets to rally.

Take a look:

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One Man’s Opinion: Warning: Risk Parity Funds Will Trigger Another 1987-Type Crash

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By Graham Summers

If you’ve been reading us for some time, you’ve probably wondered why the market keeps rallying no matter what.

Time and again, stocks start to breakdown and then suddenly BOOM they erupt higher. CNBC and other financial media outlets then trot out various narratives to explain the action.

“Stocks went up because the data was strong and the economy is improving!”

“Stocks went up because the data was weak and the Fed will have to intervene!”

These narratives, while amusing, are complete fiction.

Stocks are rallying due to abject intervention.

That intervention is occurring when the Fed has one of its proxies (one of the TBTF banks) engage in obvious and clear manipulation.

Now, market manipulation is a normal facet of the world ever since the 1987 Crash forced Reagan to create the Plunge Protection Team.

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ETFs On The Cutline – Updated Through 05/12/2017

Ulli ETFs on the Cutline Contact

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 243 (last week 237) 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 May 12, 2017

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2017/05/weekly-statsheet-etf-tracker-newsletter-updated-05112017/

ECONOMIC DATA POINTS CONTINUE TO WEAKEN

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

The low volatility environment continued as the VIX extended its steak of closing below 11 for 15 consecutive days thereby smashing the previous record. As a result, the major indexes moved in a narrow range, mostly below the unchanged line, appearing to bounce off a glass ceiling all week long.

Equities, with the exception of the Nasdaq, ended in the red for the week with the S&P 500 losing 9 points or -0.33%, a move that is hardly worth mentioning. The retail massacre continued as retail sales missed across the board summarized as follows:

  1. Retail Sales up 0.4%, missing expectations of +0.6%, up from an upward revised 0.1%
  2. Retail sales up 4.5% Y/Y, down from 5.2% in April
  3. Retail sales less autos rose 0.3% in April, est. 0.5%, unchanged from last month’s revised 0.3%
  4. Retail sales ex-auto dealers, building materials and gasoline stations rose 0.2% in April
  5. Retail sales ‘control group’ rose 0.2% m/m in April

Source: ZH

Financials were the loser over the last 5 trading days, but tech performed well with the FAANGs (Facebook, Amazon, Apple, Netflix, Google) taking top billing and accounting for most of the gains. Translated, it means that these 5 stocks gained in market cap while the remaining stocks in the S&P 500 ended in the red. Ouch!

US Macro data has now collapsed for the 8th straight week and has decoupled from reality in similar fashion as it did in 2015. Take a look at these charts and see how that ended up:

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 05/11/2017

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, May 11, 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 +3.30% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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