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 (265 vs. 256 current).
GOLD AND SILVER REACH NEW HIGHS AMID INFLATION CONCERNS, BITCOIN NEARS $70K
[Chart courtesy of MarketWatch.com]
Moving the market
The Nasdaq surged ahead, driven in part by an impressive 8% jump in Netflix shares. The streaming giant not only exceeded earnings expectations but also reported a remarkable 35% increase in ad-tier memberships.
Meanwhile, the Dow lagged after reaching a new all-time closing high the previous day, and the S&P 500 posted a moderate gain. Despite only modest weekly gains, the major indexes have now achieved their sixth consecutive positive week, showing resilience against the typically negative seasonality of this period.
On the economic front, September saw a significant decline in Housing Starts and Building Permits, following an unexpected rise in August. Multi-family permits plummeted by 10.8% month-over-month, and multi-family starts dropped for the second consecutive month.
As highlighted by ZH, the Fed’s decision to cut short-term rates has paradoxically led to rising mortgage rates and a slowdown in builders’ plans, indicating a reversal of the expected economic reaction.
Small Caps led the market this week, driven by a relentless short squeeze. Banks also performed well, buoyed by strong earnings, while the technology sector remained stagnant and energy stocks declined.
Bond yields saw considerable volatility but ended with minor changes, with the 10-year yield crossing above 4%, dipping below it, and finally closing at 4.08%.
Gold surged, effortlessly slicing through the $2,700 level to reach a new all-time high with a 1.09% gain. Silver followed suit, surpassing $33 and achieving its highest close since December 2012.
The dollar strengthened, ending at levels last seen in July, while Bitcoin approached the $70,000 mark. Conversely, oil prices continued to decline, losing their $70 support, and erasing nearly all of October’s gains.
The advances in precious metals and Bitcoin suggest to me that inflation remains a significant concern. The Fed’s recent 0.5% rate cut may prove to be a policy error, as inflationary pressures are likely not only to persist but also to increase.
ETF Data updated through Thursday, October 17, 2024
How to use this StatSheet:
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.
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.
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.
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 +9.47% and is in “Buy” mode as posted.
Semiconductor stocks were the driving force behind the major indexes’ early rise, with Nvidia reaching a new all-time high.
Taiwan Semiconductors contributed to the positive sentiment by not only reporting strong quarterly results but also raising its revenue forecasts. Other semiconductor companies, such as TSMC and AMD, also saw significant gains, erasing the previous day’s losses.
Despite the renewed interest in tech stocks, the indexes closed near their starting points, except for the Dow, which achieved a moderate gain and a record close.
In economic news, retail sales data indicated that consumer spending continues to grow, with a 0.4% increase last month, surpassing the expected 0.3% forecast. However, after seasonal adjustments, the year-over-year growth slowed to 1.7%, the weakest since January.
On an unadjusted basis, retail sales fell by a surprising 7.5% month-over-month, as highlighted by ZH. This discrepancy underscores the games that can be played with statistical adjustments.
Jobless claims for the week ending October 12 were lower, continuing a trend of positive labor market news throughout the year, although such figures are often subject to later revisions.
Bond yields reversed course and rose sharply, with the 10-year yield reaching 4.10% again. The dollar continued its upward trend, bolstered by rising rates, and has now advanced in 12 of the last 14 days.
Despite this, gold rallied to another record high, while Bitcoin lost some momentum, retreating from the previous day’s $68,000 level. Oil prices remained steady within their three-day trading range.
While forecasts are anything but certain, for the time being, the markets are pricing in a Trump victory, as this chart shows.
This morning, the market showed choppy behavior, as traders attempted to adopt bullish sentiment following yesterday’s pullback, which saw major indexes relinquish their record highs.
I expected the atmosphere of uncertainty to persist, driven by the ongoing earnings season and the upcoming presidential elections, both contributing to a “nervous” environment.
This week’s earnings reports have been mixed: banks have outperformed, while United Health and chipmaker ASML have fallen short of expectations.
On a positive note, Morgan Stanley exceeded estimates, and United Airlines also reported better-than-expected results.
Ultimately, the bulls prevailed, pushing the Dow to another record high despite stretched valuations. Of the 50 S&P 500 companies that have reported third-quarter earnings, 79% have surpassed expectations, maintaining a sense of optimism in the market.
Interestingly, the financial sector and Bitcoin have moved in tandem, both trending higher. Small-cap stocks outperformed, while the Nasdaq lagged, benefiting from a continued short squeeze.
Lower bond yields favored the utilities sector, with XLU, which we own, posting an impressive 2.01% gain. The 10-year yield briefly dipped below 4% but closed just above that level.
The dollar strengthened again, but this did not negatively impact gold, which rallied to a new closing record high. For now, gold and the dollar appear to have decoupled.
Bitcoin reached $68,000 today for the first time since July, while crude oil remained steady above $70.
Despite the rising foreign default risk for the USA, which has reached its highest level in a year, there seems to be little concern. However, this could become significant in the future.
The major indexes retreated from their highs as traders digested the latest earnings reports and observed the 10-year bond yield slipping back towards 4% from yesterday’s surge to 4.10%. So far, 40 of the S&P 500 companies have reported their latest results, with 80% surpassing analysts’ expectations.
Despite some traders acknowledging that the S&P 500 might be slightly overvalued, positive news flow has provided support during this notoriously volatile period. Consequently, the major indexes remain higher for the month.
In other news, reports that Israel allegedly agreed not to target energy facilities caused crude oil prices to drop nearly 4%, though they managed to stay above $70. Semiconductor giant ASML reported dismal earnings and outlook, resulting in a 17% stock drop, erasing all its 2024 gains.
The MAG7 basket suffered collateral damage, giving back all of yesterday’s gains, which led the Nasdaq to close lower ahead of the Dow and S&P 500. Among the big banks, five out of six reported gains, with Citi Bank being the exception. Bond yields pulled back from their recent rise, with the 10-year yield trending back to 4%.
The dollar maintained its bullish momentum, achieving its highest close since early August, while gold continued to rise towards record highs, diverging from the currency. Bitcoin also continued its upward trend, breaking out of its descending trading channel.
As Zero Hedge pondered: Will Bitcoin maintain its tracking of global liquidity?
