Bitcoin’s Bullish Surge Overshadows Mixed Market Data

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Today, Wall Street’s recent surge took a pause, leading to a dip in stock values as the trading week commenced. Despite this, the market is poised for its fifth straight month of gains, with major U.S. stock benchmarks reaching unprecedented closing highs just last week. The S&P 500 saw an increase of approximately 2.3%, the Dow Jones Industrial Average edged closer to the 40,000 level with a nearly 2% rise, and the Nasdaq Composite climbed about 2.9%.

These upward trends were propelled by the Federal Reserve’s reaffirmation of its rate-cutting schedule for the year and the continued excitement over tech stocks, spurred by an AI-driven rally. Although the American Association of Individual Investors Sentiment Survey indicates that overall investor sentiment is still above average, concerns linger about the repercussions of a prolonged rally and persistently high interest rates.

Historical analysis of Federal Reserve rate cycles since the 1970s suggests that the initial rate cut in a cycle poses a greater threat to investors than the subsequent pause. This week, the release of the February personal consumption expenditures price index (PCE) will shed light on inflation trends. However, the market’s response will only be observed the following Monday due to the Good Friday holiday.

On a day marked by disappointing housing and manufacturing data, bond yields and oil prices rose, but Bitcoin dominated the news cycle with a surge above $71,000, partly driven by short sellers covering their positions. The weaker dollar, influenced by a shift in rate-cut expectations, also favored gold prices.

Amidst geopolitical tensions in the Middle East and Russia, bond yields increased, and crude oil prices surged. The MAG 7 stocks recovered from an early plunge, and while Nvidia enjoyed a rally, it failed to surpass its March peak.

With time remaining in this abbreviated trading week, I wonder: What will the next market move be?

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ETFs On The Cutline – Updated Through 03/22/2024

Ulli ETFs on the Cutline Contact

Do you want to know which ETFs are hot and which ones are not? Then you need my High-Volume ETF Cutline report. It tells you how close or far each of the 311 ETFs I follow is from its long-term trend line (39-week SMA). These are the ETFs that trade more than $5 million a day, so they are not some obscure funds that nobody cares about.

The report is split into two parts: The winners that are above their trend line (%M/A), and the losers that are below it. The yellow line is the line of shame that separates them. You can see how many ETFs are in each group and how they have changed since the last report (268 vs. 271 current).

Take a peek:

The HV ETF Master Cutline Report

If you are confused by some of the terms we use, don’t panic. I have a helpful Glossary of Terms for you.

If you want to learn more about the Cutline method and how it can make you rich (or at least less poor), read my original post here.

ETF Tracker Newsletter For March 22, 2024

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

DOW CHARGES AHEAD: BEST WEEK OF THE YEAR DESPITE TODAY’S SLIP

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Despite a slight dip in today’s session, the stock market maintained its upward trajectory, with the Dow Jones Industrial Average charging towards its most impressive week of the year. The three major indexes all posted robust gains: the S&P 500 surged by 2.3%, the Nasdaq climbed 2.8%, and the Dow led the pack with a 2.1% increase, marking its strongest performance since December.

The market’s overall trend remains bullish, highlighted by a series of new highs and on course for a fifth straight month of growth. This week’s Federal Reserve meeting contributed to the optimism, as the central bank held interest rates steady. Fed Chair Powell’s remarks suggested that rate cuts are on the horizon, despite recent high inflation figures that had some investors bracing for a delay in monetary easing. This assurance was sufficient to propel the market forward.

While the markets seem to be riding a wave of enthusiasm, it’s worth noting that the Fed’s comments don’t guarantee a rate cut in June. Nonetheless, the Economic Surprise Index is on the rebound, and expectations for a rate reduction are mounting. Consequently, it’s no shock to traders that stocks have soared to new heights, with all major indexes wrapping up a strong week, led by the Nasdaq’s performance.

Midweek saw an intense short squeeze that eventually fizzled out, resulting in a subdued finish. Meanwhile, falling bond yields lent support to the markets, the dollar surged to a six-week peak, and Bitcoin held steady around the $64k mark. Gold hit a record high early in the week but retreated to close nearly unchanged, mirroring crude oil’s trajectory after its peak on Tuesday.

However, the recent surge in crude oil prices, now over $80, could spell trouble if the trend persists. Rising fuel costs may negatively impact the upcoming Consumer Price Index (CPI) report and influence the Federal Reserve’s decision on whether to implement a rate cut in June.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 03/21/2024

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, March 21, 2024

How to use this StatSheet:

  1. Out of the 1,800+ ETFs out there, I only pick the ones that trade over $5 million per day (HV ETFs), so you don’t get stuck with a lemon that nobody wants to buy or sell.
  1. Trend Tracking Indexes (TTIs)

These are the main indicators that tell you when to buy or sell Domestic and International ETFs (section 1 and 2). They do that by comparing their position to their long-term M/A (Moving Average). If they cross above, and stay there, it’s a green light to buy. If they fall below, and keep going, it’s a red light to sell. And to make sure you don’t lose your shirt if things go south, I also use a 12% trailing stop loss on all positions in these categories.

  1. All other investment areas don’t have a TTI and should be traded based on the position of each ETF relative to its own trend line (%M/A). That’s why I call them “Selective Buy.” In other words, if an ETF goes above its own trend line, you can buy it. But don’t forget to use a trailing sell stop of 12%, or less if you’re feeling nervous.

If some of these words sound like Greek to you, please check out the Glossary of Terms and new subscriber information in section 9.

  1. DOMESTIC EQUITY ETFs: BUY— since 11/21/2023

Click on chart to enlarge

This is our main compass, the Domestic Trend Tracking Index (TTI-green line in the above chart). It has broken above its long-term trend line (red) by +11.55% and is in “Buy” mode as posted.

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Market Divergence: Nasdaq And 10-Year Yield At A Crossroads

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Today, the stock market saw a significant uptrend, with technology shares outshining the rest. This surge builds upon the previous session’s momentum that set new records on Wall Street. Leading the charge, mega-cap technology companies like Meta Platforms, Microsoft, and Amazon each saw gains of at least 1%. In contrast, Apple experienced a 3% decline amid an antitrust lawsuit filed by the Justice Department.

The market’s upward trajectory continued from Thursday, propelling the three major indexes to unprecedented closing highs. Notably, the S&P 500 surpassed the 5,200 level for the first time. These gains align with the Federal Reserve’s recent announcement, which signals three potential interest rate cuts this year while maintaining current borrowing costs.

Federal Reserve Chairman Jerome Powell, in today’s press conference, hinted at possible rate reductions if the downward trend in inflation persists. However, the specifics of these cuts remain undisclosed.

A slew of positive economic indicators—including the Philly Fed, jobless claims, PMIs, Leading Indicators, and existing home sales—contributed to a rise in the Citi Economic Surprise Index. Yet, this wave of optimism has paradoxically dampened the anticipation for rate cuts in 2024.

As bond yields showed mixed signals, the dollar made a strong comeback, nearly erasing the losses from the previous day. Meanwhile, Bitcoin edged closer to the $65k mark, and gold prices shifted, contradicting the previous day’s trend. It’s important to note a discrepancy in the MarketWatch chart numbers above.

Additionally, a notable divergence between the Nasdaq and the 10-year yield has emerged this year, leading to the question:

Which will yield first, the Nasdaq or the bond market?

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Powell’s Puzzle: Market Rallies Amid Rate-Cut Tease And Dollar’s Dive

Ulli Market Commentary Contact

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

In today’s financial frolics, stocks took a joyride upwards after the Federal Reserve played it cool, keeping rates parked at a sky-high 23-year peak. Despite this, they’re eyeing a trio of rate cuts by the end of 2024’s calendar pages. The big three indexes didn’t just climb; they set new altitude records, while Small Caps had a blast, rocketing to stellar heights.

The Fed’s crystal ball still forecasts those three rate reductions, but they’re playing hard to get, wanting a peek at more signs that inflation’s taking a chill pill. Before the bigwigs met, the rumor mill churned out fears of inflation’s hot streak leading to fewer rate cuts, but the Fed’s dot plot kept the triple cut dream alive, giving traders and the market’s mood a nice boost. It seems the Fed’s not ready to sober up from the rate-cut party just yet, and for now, the market’s eating it up with a rally spoon.

Powell, the financial oracle, dropped some cryptic clues:

“We’re treading carefully; it’s a coin toss on risks.”

“No decisions today, folks. But we might ease off the money hose soon, as per the grand plan.”

Translation: It’s as clear as a foggy morning in San Francisco.

In a twist, rate-cut bets for 2024 actually went up, sending the dollar on a nosedive and giving gold a high-five with a new shiny record. Bitcoin got back in the game, bouncing over the $65k fence, and the MAG 7 strutted to a record beat, all thanks to bond yields taking a tumble. Crude oil played the rebel, dipping under $82.

Hats off to ZeroHedge for the CPI time-travel chart. So, fellow market watchers, are we strapping in for another inflation rollercoaster ride?

Continue reading…

2. Current “Buy” Cycles (effective 11/21/2023)

Our Trend Tracking Indexes (TTIs) have both crossed their trend lines with enough strength to trigger new “Buy” signals. That means, Tuesday, 11/21/2023, was the official date for these signals.

If you want to follow our strategy, you should first decide how much you want to invest based on your risk tolerance (percentage of allocation). Then, you should check my Thursday StatSheet and Saturday’s “ETFs on the Cutline” report for suitable ETFs to buy.

3. Trend Tracking Indexes (TTIs)

Before Federal Reserve Chairman Powell’s remarks on interest rates, the major stock indexes showed no significant movement. However, after his comments, which leaned more towards a stricter (hawkish) rather than lenient (dovish) stance on interest rates, the markets interpreted this as favorable. Consequently, there was a notable rally, and the markets finished strong.

Similarly, our TTIs also experienced an upswing and ended the day on a higher note.

This is how we closed 3/20/2024:

Domestic TTI: +10.79% above its M/A (prior close +9.84%)—Buy signal effective 11/21/2023.

International TTI: +10.47% above its M/A (prior close +9.70%)—Buy signal effective 11/21/2023.

All linked charts above are courtesy of Bloomberg via ZeroHedge.

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WOULD YOU LIKE TO HAVE YOUR INVESTMENTS PROFESSIONALLY MANAGED?

Do you have the time to follow our investment plans yourself? If you are a busy professional who would like to have his portfolio managed using our methodology, please contact me directly to get more details.

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