ETFs On The Cutline – Updated Through 10/21/2016

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 254 (last week 254) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line 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 October 21, 2016

Ulli ETF Tracker Contact

ETF Tracker StatSheet

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https://theetfbully.com/2016/10/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-10202016/

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Market Commentary

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

The major indexes ended up just about unchanged with the exception of the Nasdaq which eked out at +0.30% gain. Energy and Healthcare fell while Microsoft and McDonald’s kept the markets propped up. Still, questions keep coming up as to whether the lack of pace with regards to economic activity can justify the current lofty equity levels.

As I have repeatedly posted, macro data have been on a downward slide for a couple of months now, and it’s just a matter of time when the major indexes have to adjust to that reality. Of course, with Central Banks manipulating markets higher, there is no way of knowing when that moment of truth will arrive. Here’s the visual, thanks to ZH, in regards to the divergence between the S&P 500 and current US Macro data:

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 10/20/2016

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ETF Data updated through Thursday, October 20, 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

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Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in the above chart) remains above its long-term trend line (red) by +1.47% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Volatility Increases As Crude Oil Crumbles

Ulli Market Commentary Contact

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

Markets were a little chaotic early in the session as the major indexes had rallied and then collapsed below the trend line very quickly as the chart above shows. Slowly but surely, we recovered, touched the unchanged line a few times but ended up closing slightly below it.

Economic data points continued their downward path with jobless claims jumping the most in over 5 months, existing home sales growth stalling (yet prices kept rising) while consumer confidence slipped to the lowest since last year. In other words, the economy is going nowhere fast.

Over in Europe, the ECB disappointed by not considering a QE extension beyond March and Draghi announcing that “extraordinary policy support won’t exist forever.” Of course, things in Europe work the same as here in the US and bad market news ended up being good news, as an early sell off was followed by a broad recovery with the German DAX closing up +0.52%. Go figure…

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Earnings And Oil Assist The Markets

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The major indexes rallied moderately supported by better-than expected quarterly results from Morgan Stanley along with oil prices, which gained over 2% and are nearing their 15-month high.

And again, data points confirmed sluggishness in the economy as shown by weak housing data and a disappointing outlook in the tech area, which kept the Nasdaq hovering around the unchanged line all day.

Of course, all eyes are on tonight’s final Presidential debate, which contributed to the markets being in “subdued” mode. With the daily economic data flow coming in mostly to the downside, it clearly shows that the level of the S&P 500 does not represent the true economy, but GDP numbers do. ZH posted this spot-on chart for reference:

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Netflix Saves The Day

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Of course, it’s only the beginning of the third quarter earnings season but talk of growth expectations in the +0.2% area was the theme of the day. It also means that the quarter has to stay on this track to match the fourth-quarter of 2014 in which both earnings and revenues headed north. If that happens, it would bring to an end a four quarter string of declines. Netflix was the star of the day with a gain of 19%.

Offsetting corporate news was the reality we all have to live with and that is higher inflation. US consumer prices showed their biggest gain in five months with +0.3%. As you know, the Fed has a 2% inflation target and uses an inflation measure, which is currently at 1.7%. As we get closer to this target, the odds increase that a rate hike may no longer be avoided. After all, you can’t simply turn inflation on or off with a switch. Once it gains momentum it’s very difficult to reverse.

For the day, the three major indexes closed up, but it remains to be seen if the balance of earnings season can support current expectations.

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