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 (280 vs. 265 current).
INFLATION FEARS PERSIST AS STAGFLATION LOOMS, YET MARKETS CLIMB HIGHER
[Chart courtesy of MarketWatch.com]
Moving the market
After undergoing a dip on Thursday, the major indexes regained upward momentum, with the S&P 500 not only achieving a fifth consecutive winning week but also setting a record.
However, the Nasdaq lagged, partly due to Tesla shares plummeting by approximately 7% following an underwhelming announcement about their “robotaxi.”
The start of the earnings season contributed to the positive market sentiment, as major banks exceeded profit and revenue expectations. HP Morgan advanced by 5%, while Wells Fargo surged around 6%.
The Producer Price Index (PPI) remained unchanged in September, contrary to the expected 0.1% increase, but it rose by 1.8% year-over-year, surpassing the 1.6% expectation. This temporarily alleviated some inflation concerns triggered by a higher-than-anticipated Consumer Price Index (CPI) increase. Consequently, traders are still anticipating two more 0.25% rate cuts this year.
However, medium-term inflation expectations increased, as reflected in the University of Michigan’s sentiment data for October, indicating that U.S. consumers are aware that inflation will persist in various aspects of life.
Additionally, the specter of stagflation has reemerged, with inflation rising and macroeconomic growth data declining. Despite these challenges, computer algorithms continued to drive stocks higher. Even the 10-year bond yield approaching 4.10% did not dampen bullish enthusiasm.
Heavily shorted stocks experienced significant short squeezes, while Chinese markets remained in turmoil due to government crackdowns, leading to an exodus of foreign investors.
Bond yields were mixed for the day, but the long end rose for the week. The dollar rallied for the second consecutive week but pulled back towards the close. Gold rebounded from Wednesday’s lows but fell short of its $2,700 target.
Crude oil traded sideways but managed to post a weekly gain. Bitcoin surged, reaching the $63,000 level.
ETF Data updated through Thursday, October 10, 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 +7.98% and is in “Buy” mode as posted.
The major indexes retreated from their elevated levels as rising inflation and unemployment provided traders with a sobering reality check.
Despite these concerning figures, the pullback was moderate, even though they suggest potential stagflation—characterized by higher inflation coupled with stagnant or slow economic growth.
Core consumer prices, a key metric favored by the Federal Reserve, increased by 0.3% month-over-month, surpassing the expected 0.2% and marking the strongest reading since March. Year-over-year, this resulted in a rise of 3.3%, slightly above the anticipated 3.2%.
The headline Consumer Price Index (CPI) also climbed, with the year-over-year figure reaching 2.4% compared to the expected 2.3%. This indicates that CPI has been accelerating over the past two administrations, with a more pronounced increase in the last four years.
Food inflation has been relentless, showing a staggering growth of 22.5% over the past four years.
Bucking the day’s trend, Nvidia gained over 1.6% during the session. Bond yields were mixed, the dollar rallied for the eighth consecutive day, and gold prices also rose, recovering from a recent dip.
However, Bitcoin faced a bearish session, dropping below the $60,000 mark, while crude oil surged, reaching $76 on an intraday basis.
Given these developments, it seems inflation might remain a persistent issue. Could we be on the verge of experiencing an inflation scenario reminiscent of the 1970s?
The markets attempted to build on yesterday’s recovery, with major indexes starting the day on a positive note.
This momentum was boosted by the release of the Federal Reserve’s September meeting minutes, which revealed that most participants favored a larger 0.5% rate cut over a more modest 0.25%. This news fueled bullish sentiment, leading to a strong market performance, with the Dow taking the lead and the S&P 500 reaching another all-time intraday high.
Overnight, however, China’s indexes declined, with their large-cap ETF dropping 2% following the previous day’s sharp selloff.
Wall Street’s recovery on Tuesday was driven by gains in the tech sector and a significant pullback in oil prices, which continued into today. Traders remain optimistic that the Fed can achieve a soft landing, a view primarily supported by last week’s headline jobs report showing continued strength in the labor market. However, a closer examination of prior revisions suggests this optimism may be misplaced.
The MAG7 basket continued its recovery from Monday’s plunge, while bond yields rose again, with the 10-year yield closing at 4.077%, well above the critical 4% level.
The dollar maintained its upward trajectory, reaching its highest point since August. This strength in the dollar weighed on gold and Bitcoin prices, both of which slipped, with Bitcoin testing the $61,000 level. Crude oil also retreated from Monday’s high.
Meanwhile, the U.S.’s foreign default risk reached its highest point since December, and despite the Fed’s rate cut, mortgage rates surged back up to nearly 7%, offering no relief to homebuyers.
Oil prices dropped by over 4%, which helped equities rebound after yesterday’s losses. Despite ongoing tensions, Israel has yet to retaliate.
Bond yields rose slightly, but not enough to prevent a market recovery, with the Nasdaq leading the charge. The Middle East conflict, upcoming elections, hurricane damage, and other uncertainties are expected to increase market volatility.
Traders remain optimistic about the economy’s resilience, even though many indicators suggest otherwise. For instance, buying conditions for houses and vehicles have plummeted to levels not seen since the 1980s, highlighting consumer struggles:
Given that consumer activity accounts for 67% of economic activity, such data does not indicate a robust economy.
The major indexes made a strong comeback, even as China’s markets fell overnight. The S&P 500 erased all of yesterday’s losses, and the MAG 7 stocks recovered but remained within their two-week trading range.
Bond yields paused their recent surge, ending mixed, with the 10-year yield closing at 4.021%, its highest since July. The dollar broke out of its three-day trading range but weakened towards the end of the session.
The dollar’s strength negatively impacted gold, which bounced off its $2.6k support level. Bitcoin also fell, giving up yesterday’s gains.
While the markets absorbed China’s mini-crash, upcoming events like the CPI report on Thursday and the start of the earnings season on Friday could disrupt positive trading sentiment.
