The euro “might start to unravel” if Deutsche Bank collapses according to respected financial journalist Matthew Lynn. “It all has a very 2008 feel to it …” he warns in the Telegraph where he outlines his growing concerns about Deutsche Bank, concerns we have written about in recent months. He writes:
Our image of German banks, and the German economy, as completely rock solid is so strong that it takes a lot to persuade us they might be in trouble.
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 325 (last week 323) 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 StatSheet
————————————————————-
————————————————————
Market Commentary
A RUMOR SAVES THE WEEK
1. Moving the Markets
I had to laugh out loud this morning when I saw the markets rallying predominantly supported by a rumor that Deutsche Bank (DB) is close to a $5.4 billion settlement with the US Justice Department (DOJ) as confirmed by the French Press (AFP). Recall that the “opening bid” was a penalty of over $14 billion a few weeks ago. That reduction served not only as the catalyst to pull DB’s stock price out of the basement for a gain of 14% but also supported the entire US equity market.
It’s laughable if we are to assume/believe that with this “discount” all of DB’s problems are resolved and the world’s most systemically dangerous bank no longer presents a threat to the banking system. To me, it looked more like a last minute assist by AFP to calm things down as Deutsche was facing severe outflows of cash while credit default swaps were soaring.
Monday is a banking holiday in Germany but depending on any further announcements by the DOJ over the weekend, or lack thereof, perception of reality may shift and cause another sell-off.
With Fed chief Yellen entertaining the possibility of the Fed potentially buying equities to keep markets propped up, none other than CNBC’s Rick Santelli resorted to 3 minutes of hard hitting truth by spilling his guts in this epic rant. It’s worth viewing.
ETF Data updated through Thursday, September 28, 2016
Methodology/Use of this StatSheet:
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.
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
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 +2.22% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.
1. Moving the Markets
Stocks ended lower today after reports surfaced that some hedge funds were cutting their exposure to Germany’s Deutsche Bank (DB), a move which raised fears that some clients are leery about doing business with the European banking giant. Did a bank run begin? While it’s too early to tell, the denial by DB’s John Cryan about needing more capital and an even more furious denial by ECB’s Draghi that low rates are partly to blame, as well as Chancellor Merkel’s remarks that a government bailout is not in the cards, are sure signs that more trouble is brewing and the pain is spreading.
Some rumors buzzing hint that the swift selloff on Wall Street today signals investor nervousness eight years after the bankruptcy of Wall Street titan Lehman Brothers. If the reports of hedge funds moving money out of Deutsche Bank are true, it may suggest that investors don’t want to put their own cash at risk in the event Deutsche Bank’s problems worsen.
A bit of interesting news on the artificial intelligence front, today, we heard that Amazon (AMZN) is offering $1 million to the university team that builds an artificial intelligence that can keep up its side of the conversation with a human being for 20 minutes. To aid the endeavor, up to ten teams will get a $100,000 stipend from Amazon along with Alexa-enabled devices, free cloud computing and support from Amazon’s Alexa team. Just something to keep an eye on in the future.
1. Moving the Markets
After an early drop, the markets recovered and managed to close in the green in part due to quarterly window dressing. Oil shifted into high gear and gained some 4.6% on renewed Saudi jawboning about future production limits.
The spot on article “This market calm feels like mayhem” by ZH, points to anxieties by investors, which I summarized as follows:
This is the most difficult, treacherous and damnable investing environment there’s ever been.
The market is in a dangerous bubble; now let’s talk about the following stocks you just have to chase because they’re cheap.
We all know there are bubbles galore. That’s called received monetary policy wisdom. And every time they assure in speech or testimony that an end is conceivable something conspires to pull them back in.
The latest policy maker “do as I do, rather than say” was caused by today’s eyebrow-raising decision by the BOJ to follow last week’s big discussion on steeper yield curves with a business-as-usual purchase of super-long Japanese Government Bonds.
We know the prices of most assets are hopelessly distorted, yet prudence has had a very high price.
For too long a time, traders got by figuring they could front-run (trust) quantitative easing and disregard the rest. That game is getting long in the tooth as monetary policy runs out of gas and policy-makers are trying, unsuccessfully, to play it by ear. But what to do in response?
No one knows and, as a result, a lot of important assets are confusingly and maddeningly trapped in tight, uninformative ranges. No one wants to buy, no one can afford to sell and nobody’s happy.
The only things moving are sideshows like Mexican peso, which have nothing to do with the global economy.
Given these uncertainties, I have to point out again the importance of using a sell stop discipline, because when this house of cards falls, things can get very ugly very fast.
