ETF Tracker Newsletter For October 28, 2016

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ETF Tracker StatSheet

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https://theetfbully.com/2016/10/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-10272016/

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Market Commentary

FBI Announcement Kills Market Rebound

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

The surprise came out of left field, as the markets were enjoying a modest rebound, in form of an FBI announcement that it will investigate new emails related to the Democratic nominee Hillary Clinton. That’s all it took and the S&P dropped about 1% before crawling back and limiting its losses for the day to -0.31% and -0.7% for the week.

FBI Director James Comey said in a letter to congressional Republicans that more emails had surfaced that “appear to be pertinent to its investigation” causing momentary panic that the outcome of the elections might be affected.

The latest GDP data showed a growth of 2.9% in the third quarter stoking fears that the case for an interest hike is still on the table. However, with the next Fed meeting being a few days before November 8, a potential hike will very likely be postponed until the December gathering.

Still, I expect volatility to ramp up as we move closer to Election Day. I also would not be surprised to see our Domestic Trend Tracking Index (see section 3 below) to break below its trend line and signal a return to bear market territory. We have now broken below the +1% level and things could accelerate from here. Stay tuned!

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 10/27/2016

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, October 27, 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 +0.94% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Equities Dip As Interest Rates Spike

Ulli Market Commentary Contact

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

Finally, at least for one day, stocks and bonds were correlated again, something we have not seen in a while, and this may be a harbinger of things to come. Bond prices dropped as yields rose and stocks headed south early on, recovered mid-day, but the rally faded into the close leaving the S&P 500 with a -0.30% loss.

Earnings reports turned this session into a choppy and sloppy one with the Healthcare index showing strength while the real estate sector got clobbered and lost -2.5%, its worst decline in some 6 weeks.

After the close, Google rose 2% while heavyweight Amazon tumbled more than 6% after disappointing quarterly results. On deck tomorrow is the always highly anticipated jobs report, which can move markets in either direction.

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Oil Leads Equities With Pump-And-Dump Theme

Ulli Market Commentary Contact

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

Equities started the day on a weak note when oil prices suddenly got pumped to touch the $50/barrel point before being dumped and ending the day down -1.62%. The S&P 500 followed suit but managed to limit its losses to a meager -0.17%.

Apple weighed on the overall market and closed down -2.25% as earnings in general did not bring any surprises, except for Boeing, which lifted the Dow by gaining +4.7%. Still, anxiety exists as earnings season continues and Wall Street looks towards Friday’s jobs report as well as the upcoming elections.

As has been the case lately, the worst performing sector was again Healthcare. Since that is a sector featured in my Spotlight ETFs below, you will have noticed that XLV has been in “Sell” mode for some time and has also broken below its respective trend line by -2.24%, which indicates that it is firmly entrenched in bear market territory. If you still own it, you haven’t been paying attention.

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Earnings Data Wipe Out Yesterday’s Gains

Ulli Market Commentary Contact

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

After a weak opening, the S&P 500 managed to kiss the unchanged line, but it was all downhill from there as stocks slipped from their 2-week highs made yesterday. Not helping matters was the dying Consumer Confidence bounce with the indicator sporting its biggest plunge in 11 months.

The US dollar continued its spike upwards supported in part by ever increasing interest rate hike odds, which now have topped 70%. While that may spell trouble for equities in the months ahead, a neutralizing factor could be a continued voracious appetite for stocks, a least for the time being.

Globally, economic weakness prevails as bellwether Caterpillar seems to confirm month after month. They have now failed for 46 consecutive months to post a retail sales increase. They again missed not only revenues but also slashed full year guidance. But then again, none of these realities matter to the markets as long as we can count on or hope for further Central Bank accommodative policies.

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Earnings And Acquisitions Support The Indexes

Ulli Market Commentary Contact

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

The S&P touched a two-week high as acquisitions and mergers confirmed to some that, despite hugely elevated market levels, untapped value still exists, although that is clearly in the eye of the beholder.

Expected annualized earnings are supposed to have been risen 1.1% last quarter, which is an improvement after four quarters of contraction. On one hand, this is a positive, however, on the other one also has to look at the fact that the major indexes hovering at extremely high levels, thanks to the Fed’s easy monetary policy, and are already evaluated way higher than underlying economic data would warrant. So, how much upside is left?

A potential fly in the ointment was the crash of China’s currency to all-time lows. When that has happened in the past, as in August 2015 and January 2016, stock markets have followed south and gone into meltdown mode. Will it happen again? Since no one has the answer, we’ll have to wait and see how that theme plays out and if there will be a fallout effect prior to the US election.

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