ETF Tracker Newsletter For April 21, 2017

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ETF Tracker StatSheet

https://theetfbully.com/2017/04/weekly-statsheet-etf-tracker-newsletter-updated-04202017/

EQUITIES UP FOR THE WEEK BUT SLIPPING BEFORE THE FRENCH ELECTIONS

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

Cautiousness prevailed prior to the closely contested 1st round of the French elections this weekend with equities pulling back but showing green numbers for the week as the S&P 500 gained +0.86%.

ZH summed the past 5 trading days up nicely by observing:

  1. Transportation sector best week in 4 months
  2. Small Caps best week in 4 months
  3. Nasdaq best week in 2 months
  4. S&P 500 best week in 2 months
  5. Dow best week in 7 weeks

On the other hand, bad news, like the biggest drop in US Macro Data in 6 years, was simply ignored and not reported by MSM. News from Trump at mid-day about his “greatest tax cut ever” caused a quick rebound, which was pretty much erased by day’s end.

The yield on the 10-year Treasury remained unchanged from yesterday but ended lower for the week. The dollar index inched higher but remains below its psychologically important 100 level. Gold gained a tad after being slammed 3 times this week but is still attempting to break through its 1,300 glass ceiling.

All eyes are on the French elections, the outcome of which can be “market moving” even though it’s only round one of two, with number two being on deck in 2 weeks.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 04/20/2017

Ulli Uncategorized Contact

ETF Data updated through Thursday, April 20, 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 +2.63% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Equities On A One-Way Street

Ulli Market Commentary Contact

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

After a higher opening, the markets remained steadfast and unwavering in making this session a positive one after the past few of days of floundering. Despite this effort, the S&P 500 still remains a few points lower than it started the month.

Solid earnings by American Express stabilized the financial sector for the time being with the major banks gaining for a change as the financial sector ETF XLF added +1.69% after being on a downward slide for 6 weeks as I commented on yesterday.

SmallCaps outperformed by adding +1.06% compared to +0.77% for LargeCaps and +0.79% for MidCaps. Looking at the bigger picture, the Dow is the laggard by being stuck below its 50-day M/A while the S&P 500 is hugging it and Nasdaq hovers clearly above it showing the most upward momentum. You would think that with the Nasdaq touching new all-time highs, all is well in that sector, including earnings. But you would be wrong.

Take a look at this chart:

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A Dying Dead-Cat-Bounce

Ulli Market Commentary Contact

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

An encouraging morning rally ran out of steam mid-day with the major indexes heading south and closing below their unchanged lines. The exception was the Nasdaq, which managed to cling to a gain of +0.23%.

No macro data points were released today, but the weakness in the banking sector, which I addressed yesterday, continued with Goldman Sachs slipping further. IBM’s weak quarterly numbers were the other culprit; those two heavyweights contributed to about 50% of the Dow’s loss.

Treasury yields bounced a little with the 10-year recouping 3 points or +1.38% after yesterday’s loss of -3.54%. The US dollar followed suit and climbed +0.24%, but still remains below its 100 level.

The financial ETF XLF has been on a slide ever since hitting this year’s top around March 1st. Why is this important? The Trump rally, which started on November 7, was led by the financials with the S&P 500 following suit. This trend appears to have come to an end and has reversed as the following chart shows:

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US Dollar And Bond Yields Slammed

Ulli Market Commentary Contact

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

Just yesterday, I talked about how bond yields have been slipping and sliding despite the Fed’s efforts of hiking rates in December and March. The 10-year yield has dropped from 2.62% to 2.26% over the past 4 weeks. That trend accelerated today as that yield got slammed even more ending up at 2.18% for a loss of -3.54%.

Bond markets are usually ahead of stock markets in terms of anticipating future events, and what this move indicates is what I have been talking about for a long time, namely that the economy is heading south in a big way. This has been evident when looking at hard data, such as GDP forecast, EPS expectations, retail sales, subprime auto loans and commercial real estate just to name a few. The only questions remains: when will the equity market get the message?

Not helping matters was a sharp tumble in the dollar (-0.79%) as the index broke below its psychologically important 100 level to close at 99.40. That is only a slip away from dropping below its 200-day M/A, which has functioned as a support level as recently as late March. Banks got hammered again with the loser of the year award going to Goldman Sachs which, as of March 1st had sported a YTD gain of almost 6% and has now slipped into negative territory showing a YTD performance of -9.73%.

In case you like to see the visual, here it is:

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Bounce-Back Monday

Ulli Market Commentary Contact

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

To me, today’s trading session had the look of a relief rally after last week’s sell-off, and the fact that the war mongering with N. Korea did not turn into anything more but jawboning over the Holiday weekend.

The major indexes gained solidly with the S&P 500 trying to make up the losses of the last 5 trading sessions but fell short by a few points. Oddly enough, interest rates have been slipping and sliding since early March when the 10-year T-bond peaked at a yield of 2.62% compared to today’s close of 2.26%. What’s going on here? The Fed has raised rates twice, namely in December and March and threatened at least 2 more hikes in 2017, yet rates are declining.

The answer is simple in that the bond market has not priced in any more hikes due to the fact that economic data points are weakening by the day with thousands of retail stores closing accompanied by 10’s of thousands of job losses while GDP is quickly stumbling towards zero. So, the Fed’s hike appears to be more a measure of caution so that they have some ammo to lower rates again once the long overdue recession is finally recognized.

The following chart makes this abundantly clear:

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