ETF Tracker Newsletter For December 9, 2016

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ETF Tracker StatSheet

https://theetfbully.com/2016/12/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-12082016/

Market Commentary

S&P 500 Logs In Longest Win Streak In 2 Years

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

Right now we appear to be on a one-way street as far as the stock market is concerned with the S&P 500 recording its longest win streak since June 2014 while the Dow notched its fifth week of gains.

It appears that Wall Street can’t get enough of the Trump campaign promises of lower taxes, reduced regulations and increased infrastructure investments that are bound to hopefully lead to a new life of economic growth.

Sure, the market surge looks overdone, especially when considering that none of the underlying problems of reckless government spending and ever increasing debt, just to name a couple, are not even being addressed let alone being resolved. Right now, the trend remains our friend, no matter what the underlying fundamentals say, and we will remain on board until our directional indicators give the sign to exit.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 12/08/2016

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ETF Data updated through Wednesday, December 8, 2016

TOC082516

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

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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 +1.52% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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And the Beat Goes On

Ulli Market Commentary Contact

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

Despite ECB’s Mario Draghi not exactly fulfilling the dreams of European traders by offering a mixed monetary policy decision via his announcement that his asset buys will be continued although at a reduced pace (from $80 billion a month to $60 billion), it did not matter. European markets rallied anyway with the German DAX adding another +1.75%. Again, we’re stuck in this scenario where any kind of news is a good thing.

The US markets followed suit although at a lesser pace with the S&P 500 gaining +0.22%. Supporting today’s positive sentiment was a reduction in the number of Americans filing for unemployment benefits boosting hope that the labor market is strengthening. The post election optimism continues with full force as the path of least resistance has been higher.

A few days ago, I commented on the outcome of last weekend’s Italian referendum and the dire straits the entire Italian banking system finds itself in caused by $360 billion of non-performing loans. You’d think that this would be a further downer to Italian banking stocks, which have been demonstrating bearish behavior for quite some time now. Well, if you had thought that, you’d be dead wrong as Italian banks were the best stock market performer in the world this week. Take a look at this chart:

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Reaching The Melt-Up Zone

Ulli Market Commentary Contact

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

Even President-elect Trump’s early remarks that “I am going to bring down drug prices” couldn’t prevent the major indexes from storming into record territory with the exception being Healthcare-names as the Biotech ETF IBB got flattened by losing -2.94%.

It started in Europe where, despite the worsening Italian banking crisis, which is counting on a bailout, investors ignored all news, good or bad, and decided that equities were the place to be. All six major European indexes ended up in the green with the FTSE being the leader sporting a gain of +2.10% followed closely by the DAX with +1.96%.

A new intra-day high in the Transportation index, the first time in 2 years, confirmed the bullish tone as bonds, stocks, gold and the VIX all closed higher. The indexes inched up in the morning when all of a sudden “a buying algo got excited,” as ZH put it succinctly:

S&P futures and the SPY ETF suddenly exploded in volume and ramped higher. In those few seconds 2 million SPY shares went through (around $450 million) and 32,000 e-mini contracts (around $3.5 billion) screamend through the markets.

This certainly is not what you would consider a normal market based on fundamentals, it’s a manipulated market supported by nothing but hope and hot air, which will not end well. In the meantime, however, we will enjoy the ride but are prepared to jump ship should the need arise. After all, the following picture demonstrates the only world of reality:

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Upward Trend Continues

Ulli Market Commentary Contact

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

The upward trend continued in the face of potential adversity such as the Eurozone’s political uncertainty, in part caused by the outcome of the Italian referendum, which so far has been treated as a non-event despite serious monetary ramifications. The ECB is on deck this week and scheduled to announce further monetary policy decisions.

Domestically, all three major indexes were in “go” mode with the Nasdaq faring the best by adding +0.45% while Dow edged up only slightly but enough to notch another record closing high. Telecom and bank shares were the main contributors providing the fuel for the rally.

Still, the Fed is expected to raise rates next week, which could be a positive for the simple reason that the uncertainty and rhetoric about a rate hike will have finally come to an end leaving the only question unanswered as to the number of future rate hikes.

Hope on Wall Street continues that we have finally left the earnings recession and are back on track towards a period of earnings growth, which is sorely needed in order to justify the current lofty stock market valuations. If have my doubts whether this will be possible without first going through a healthy and long overdue market pullback.

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Italy’s Referendum Defeated, But Equities Rally

Ulli Market Commentary Contact

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

I had to laugh this morning after the Italian referendum was soundly defeated putting the Eurozone banking system in danger zone in regards to a much needed bailout of the Italian banks, but Europe stocks rallied sharply with the German Dax gaining 1.63%. As one trader remarked “Brexit took 3 days to recover its losses, Trump took 3 hours and Italeave took 3 minutes…”

Not to be outdone, the US markets followed suit, after a weak ending last week, and ratcheted higher with the S&P 500 adding 0.58%. Right now, we’re back to the moment in time where all news is good news, such as the view that the Fed is set to raise rates next week, which used to be a negative for stocks. However, a hike in rates is now seen as a positive due to it benefiting the banking sector. Go figure…

The quote of the day goes to Michael Block on why the market is rallying following the Italian referendum:

…[Apparently] the pattern of fading a potential crisis and then scrambling to cover and get long when everyone takes a breath and realizes that this time is not the apocalypse either still holds more than ever. I can’t justify any of this. The lesson investors and traders are getting is that everything is a buying opportunity and you need to not miss the boat. Brexit? Bullish. Trump winning the election? Bullish. Italy saying no to the referendum and the Prime Minister handing in his resignation? Bullish. Heck, all we need is a coup d’etat in India and the entire Belgian banking system to go kablooey and the S&P 500 will be at 3,000 by Christmas Eve.

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