Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 12/15/2016

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ETF Data updated through Wednesday, December 15, 2016

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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

tti

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 +1.31% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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The Day After: Dip Buyers Pull Indexes Up

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thur-pic

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

The major indexes managed to shake off yesterday’s pullback, which marked the day of the Fed’s second hike in interest rates in almost 10 years. While this was widely expected, I thought the markets would have taken that removal of uncertainty as a positive, but Yellen spoiled the party with her announcement that she anticipates three more hikes in 2017. Hmm, 4 rate hikes were promised for 2016 and only “one” materialized…

Interest rates continued to soar with the 10-year Treasury yield now reaching 2.60% from a July 2016 low of 1.37%. That is a huge move and, if we get close to the 3% milestone, there will be some fallout in the stock market as well.

Take a look at the graph below where I have charted the S&P 500 vs. the 10-year Treasury bond:

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Fed Hikes And Market Strikes

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wed-pic

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

Despite the odds of the Fed hiking rates today having been close to 100%, Wall Street traders went on strike as the post-election bullish momentum waned, and the major indexes sold off by a modest amount which, however, was the worst pull-back in two months.

The Fed finally came through after crying “wolf” all year and hiked interest rates by an expected 0.25% but signaled that future increases could come next year at an increased pace. It’s the latter, I believe, that pulled the rug out from the buying crowd as fiscal assumptions now trend towards slightly faster growth and lower unemployment under a Trump regime.

On the economic front, things don’t seem to indicate any of that faster growth as GDP hopes faded with business inventories dropping worse than expected (-0.2% MoM). Industrial production disappointed big time by declining for the 15th straight month (-0.6% YoY). And to top it off, retail sales growth for November clocked in at a lame 0.1% MoM missing expectations of a 0.3% advance; sales of motor vehicles tumbled 0.5% MoM.

It just goes to show that the “disconnect” between stock market levels and economic fundamentals is alive and well and as wide as ever. Go figure…

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Dow 20,000 Here We Come

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tue-pic

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

Yesterday’s pause in the market, during which the S&P 500 and the Nasdaq pulled back slightly, formed the basis for more advances today as the Dow reached a point that is within striking distance of the magical 20,000 milestone marker.

All three major indexes stormed into record high territory as the post-election levitation has not shown any signs of a slowdown—so far. Nine of the eleven major S&P sectors advanced with technology being the top dog of the day sporting a gain of +1.23%.

Surely, this parabolic rally will not go on forever as it is based on nothing but hope that Trump and his GOP-controlled congress will enact pro-growth policies. Still, valuations are way out of wack with the S&P 500 trading at an outrageous 17.7 times forward 12-month earnings. This compares to a 10-year median of 14.7 times.

For the time being, the environment remains bullish with all eyes now focused on the Fed’s announcement tomorrow about interest rates. A quarter-point increase has been priced in the markets and, should this materialize, we could see Dow 20,000 by the end of tomorrow’s trading day.

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Starting The Week On A Mixed Note

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mon-pic

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

After last week’s rip-roaring run, during which the major indexes scored some solid ground, time for a break was much overdue, especially in view of the Fed’s upcoming meeting on interest rates. The final verdict will be due out on Wednesday with the odds being still close to 100% in favor of a rate hike.

As I’ve commented before, it’s not that the economic environment is justifying an increase in rates; it’s more like the Fed will finally have to deliver after crying wolf all year. At least that’s the consensus. To me it would seem that if the Fed disappoints and holds steady, the markets may stage a sell-off while, on the other hand, if the expected increase occurs, we may see a temporary pick up in the rally as this uncertainty is finally over.

Financials were leading the decliners today, the 10 year US Treasury yield ticked up some 6 basis points to 2.49% from an election reading of 1.8%. Crude oil jumped 1.83% and pushed the energy sector higher, while the US dollar slipped -0.57%.

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One Man’s Opinion: “Investors Are Dangerously Unprepared” – Axel Weber, Former Bundesbank Head Warns Of Coming Rate Hikes By ECB

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OneMan'sOpinionSubmitted by Michael Shedlock via MishTalk.com,

Axel Weber, former head of Germany’s central bank says the ECB is going to halt QE soon and hike rates by September.

Weber warns Markets Unprepared for Central Bank Shifts.

Investors are dangerously unprepared for a sharp rise in eurozone bond yields when US interest rates march higher and European quantitative easing ends, Axel Weber, chairman of UBS and the former head of the Bundesbank, has warned.

The jump in US rates could spark big jolts in the markets as the long spell of aggressive monetary easing across the globe has left many investors off-guard over a swing in the global rate cycle, he added.

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