One Man’s Opinion: Just A Quick Reminder: The Federal Reserve Is Almost Insolvent

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By Sovereign Man

September 10, 2008 was one of the last “normal” days in the world of banking and finance.

That afternoon, the US Federal Reserve published its routine, weekly balance sheet report, indicating that the central bank had total assets worth around $925 billion.

Just a few days later, Lehman Brothers filed for bankruptcy, kicking off the most severe economic crisis since the Great Depression.

And almost immediately the Fed launched a series of unprecedented measures in a desperate attempt to contain the damage.

They called it “Quantitative Easing”, which was a fancy way of saying the Federal Reserve was printing money and giving it to the banks and US government.

When the commercial banks needed to sell their non-performing toxic assets, the Fed printed money to buy that garbage.
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ETFs On The Cutline – Updated Through 04/13/2017

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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 246 (last week 241) 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 April 13, 2017

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ETF Tracker StatSheet

https://theetfbully.com/2017/04/weekly-statsheet-etf-tracker-newsletter-updated-04132017/

SLIPPING, SLIDING AND GRINDING

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

More saber rattling rattled the markets after a 21,000 pound MOAB (Mother of all Bombs) was dropped in Afghanistan to destroy some underground ISIS facilities. At this time, it’s unknown if the damage inflicted was greater in domestic equities than in the intended targets. For sure, early upward momentum vanished in no time and south we went with the major indexes ending in the red during this Holiday shortened week.

With the S&P and Dow now closing at 2-month lows, the question is as to whether the Trump-trade-train has been derailed after much of it was based on hype and hope rather than strengthening fundamentals. While there is no answer to that question yet, some technical damage has been done as all three major indexes have broken their respective 50-day M/As to the downside indicating medium term weakness.

Even good looking headlines for bank earnings failed to create enthusiasm, as a look under the hood revealed more questions than answers, so the bank slide continued with the YTD performance being deep in the red. Treasury yields dropped for the 5th straight week indicating a weakening economy, a viewpoint which I have pounded on for months.

The US dollar rebounded and recouped some of yesterday’s losses with UUP gaining +0.35%. To no surprise, gold and silver gained again with uncertainty gripping the markets, as stocks continue to hover in nosebleed territory as the following chart demonstrates:

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 04/13/2017

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ETF Data updated through Thursday, April 13, 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 +1.87% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Uncertainty Reigns; Dollar Gets Pummeled

Ulli Market Commentary Contact

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

Uncertainty and volatility reigned supreme as Secretary of State Tillerson’s meeting in Russia initially generated a small relief rally in the dollar with bond yields shooting higher. Then the hammer came down as Trump commented on a variety of issues including China and the overvalued US dollar. That was all it took, and the greenback headed south losing -0.50% as measured by the ETF equivalent UUP.

The morning spike in US Treasury yields came to an abrupt stop, reversed and rates dropped sharply with the 10-year yield ending at a 5-month low of 2.28%. The S&P 500 surrendered a milestone, namely its 50-day M/A, as it retreated by -0.38%. This was the S&P’s first close below its 50-day M/A since the election and is a sign of a weakening intermediate trend.

The big bank stocks (JPM, BAC, GS, MS) remained in tumble mode along with the tech sector, which has dropped now for the 9th straight day, its 2nd longest losing streak in 28 years. Hat tip goes to ZH for this stat. And the winner remains gold, which added another 1.15% to hone in on the 1,300 level.

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Geopolitical Uncertainty Supports Gold

Ulli Market Commentary Contact

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

As saber rattling continues to be the topic du jour, it’s no surprise that gold has been the main beneficiary by not just being the leader YTD for 2017, but also finally conquering its 5-month glass ceiling, namely its 200-day M/A. We’ll have to wait and see if current momentum can propel gold across its 1,300 level after having hovered below it since Election Day.

In terms of current hot spots and war mongering, ZH summed it up nicely:

  • US threatens North Korea
  • Everyone on the same side of the boat (long stocks, short volatility, short bonds, short Eurodollars)
  • US threatens Russia
  • Fed intent on tightening no matter what
  • China warns of red lines
  • Russia calls ‘false flag’, builds alliance
  • US threatens Syria
  • Increased frequency of terror attacks in Europe
  • Oh, and finally, Frexit looms as election in Europe are highly uncertain

 

Across asset classes, we saw the dollar weakening, oil rising, the 10-year Treasury yield slipping and equities desperately trying to get back to the unchanged line, which they almost managed to do after the early morning sell-off. The tech sector, however, continued to show weakness while bank stocks have given the words “one way street” (south) a new meaning since Trump’s speech to congress.

Things look a little wobbly right now and much focus is on the upcoming earnings season to see if new drivers can emerge to establish better upward momentum.

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