ETF Tracker Newsletter For October 7, 2016

Ulli Market Commentary Contact

ETF Tracker StatSheet

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https://theetfbully.com/2016/10/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-10062016/

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Market Commentary

SUBDUED JOBS REPORT IS A NON-EVENT

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Reaction to the September jobs report was subdued at best as the print came in at a gain of 156k, which was weaker than expected. The theme was the same as in previous months in that part-time jobs surged, full-time jobs dipped and multiple job holders jumped. In other words, more than 50% of the jobs added went to minimum wage workers. That’s not really the stuff necessary to confirm a growing economy, which is why wage growth is pretty much absent with the exception of mandatory minimum wage increases.

What that translates to is that the feared upcoming rate hike in November is out the window and December has become very questionable as rate hike odds have tumbled. Of course, things can change as the Fed has two more jobs reports on deck before their final meeting for 2016 in mid-December.

The major indexes meandered mainly below the unchanged line with the S&P 500 closing down -0.33% for the day and -0.65% for the week. The best performer for the day was Healthcare while Basic Materials were the laggard.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 10/06/2016

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, October 6, 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 +2.14% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Uncertainty Reigns In Anticipation Of Jobs Report

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The markets were definitely mired in uncertainty, as an early sell-off reversed and pulled the major indexes back up close to the unchanged line. As the chart above shows, the S&P traded within a 2 point range for some 4 hours all in anticipation of tomorrow’s jobs numbers.

Traders hope that they will shed some light as whether the Fed will continue with its “bark and no bite” policy or succumb to the need for “more data” to avoid having to make a rate hike decision that surely will rattle markets. November and December rate hike odds have risen sharply.

In regards to market reaction to either a weak or strong jobs number, it does not really matter. If this year’s history is any indication, the S&P 500 will rally no matter what according to these spot on charts from ZH. Take a look:

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Stocks In Rebound Mode

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Economic data were mixed with ADP reporting that the US economy added 154k jobs in September vs expectations of 165k. The US trade deficit unexpectedly grew in August as imports increased more than exports putting downward pressure on Q3 GDP while factory orders declined for the 22nd straight month. The only bright spot was that the ISM services index exploded to its highest level since October 2015, which makes me wonder if such an outlier will be revised sharply next month.

Just because I haven’t mentioned Deutsche Bank (DB) in a couple days, does not mean all of their issues have been resolved. Far from it! I am sure there are a lot of behind-the-scenes discussions going on as to how to save this behemoth of a bank.

Reuters reports that the German government is persuing “discreet” talks with US officials to possibly help DB secure a swift settlement:

One senior government official told Reuters there was “contact at all levels” between German and American officials. Another source said Finance Minister Wolfgang Schaeuble was not planning to meet DOJ officials during a trip to Washington this week for International Monetary Fund meetings, but added: “You can hold talks. It doesn’t have to be the minister.”

I believe the heat is on and despite jawboning to the opposite by one German party member that “At the present time, I rule out capital assistance.” While that maybe his current view, ZH concluded accurately:

There is just one small problem: Deutsche Bank holds over half a trillion euros in deposits on its balance sheet, which means that if push comes to shove, Germans will be begging for a bailout just to have access to their savings.

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Hawkish Fedspeak Pulls Markets Lower; Precious Metals Get Clobbered

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

With no economic data points being published today, trading was extremely choppy with the major indexes vacillating around the unchanged line until bearish sentiment took over. A last hour rebound limited the damage in the S&P to about -0.5%, a very minor pullback given the bubble territory the markets are hovering in.

The US dollar rallied after some hawkish comments from the Fed about the likelihood of an interest rate hike in the coming months, which pulled bonds and equities down, while precious metals were taken behind the barn for a spanking. Gold dipped to its lowest level since the Brexit vote 3 months ago. The worst performer of the day was utilities, while Financials were the best in the absence of any negative news from Deutsche Bank.

Tomorrow, the economic calendar will heat up again with reports about the non-manufacturing index and the services PMI index being on deck. I expect these data points to come in soft confirming the temporary weakness in the economy.

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Major Indexes Drop As Deutsche Bank’s Liquidity Concerns Remain

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

As I mentioned Friday, Deutsche Bank’s (DB) rumor of an impending and sharply reduced settlement blew up in smoke over the weekend as it turned out that not only was a settlement not reached but there had not even been a meeting with the DOJ to discuss matters. But the good news is DB’s executives are scheduled to head to the US very soon.

Adding insult to injury were reports that some DB customers could not access their ATMs or debit cards. That’s why I think the rumor was just a diversion to keep the troops calm and orderly. DB has over $320 billion in retail deposits and any question in the public’s eye as to potential liquidity problems would result in a bank run.

But that was not all as Italy added even more insult to injury by filing a lawsuit against several DB executives alleging improper/criminal behavior in regards to derivatives. Good thing Germany had a bank holiday today, so we’ll have to wait for tomorrow to see if there is more fallout. At this moment, it sure smells like a 2008 Lehman Brothers repeat in the making.

In case you are wondering how closely DB is tied to the rest of the world, take a look at this chart, which makes it abundantly clear that whatever happens to DB will spread around the globe.

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