Investors Eye CPI Reading And Fed’s Rate Verdict Amidst Tech Stock Surge

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The major indexes started the session in the red, with only the S&P and Nasdaq being able to climb out of that early hole and close in the green, as buying picked up late in the session.

The Fed started its 2-day meeting on interest rates today with the verdict being announced Wednesday after 11 am PST. Traders are concerned that any rate reductions may not occur, but they will analyze every word of Powell’s press conference to find something positive to prop up bullish sentiment and keep the rally going.

Last week’s strong jobs numbers decreased the chances of an imminent rate cut, and traders now are expecting or hoping for the first cut in November. To me, it looks that the Fed will continue its “higher for longer” theme and not cave to the market’s wishes. That caused a jump in 2025 rate-cut expectations but not much change in 2024.

Adding more uncertainty will be May’s CPI reading, scheduled for release prior to the Fed’s announcement.  

Apple Computers saw a huge surge, with the company now overtaking Nvidia as the second largest market cap company. The MAG 7 stocks stayed their course and rallied.

Bond yields pulled back after the recent rally, the dollar rode the range, while Bitcoin surrendered yesterday’s reach for $70k but bounce off its $66k support level.

Gold staggered higher for the second day, and oil prices advanced but fell short of reaching the $78 level.

Tomorrow’s CPI and the Fed’s decision on rates will have an impact on market direction, the question is “will it be up or down?”

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Gold And Bitcoin Rebound, Oil Surges Amidst Market Uncertainty Ahead Of CPI Release And Fed’s Rate Verdict

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

With the much-anticipated jobs report out of the way, but Wall Street still pondering its implications, the new focus is on the Fed’s interest rate decision and last month’s inflation data.

Both are due out Wednesday with the CPI potentially being a crucial point for market direction. Especially, after Friday’s allegedly strong jobs report, the Fed might continue its present policy of “higher for longer” and not cave in to Wall Street’s relentless hopes of lower rates.

Elsewhere, traders were also watching for any earthshaking new announcements from Apple’s Worldwide Developers Conference, as to any market impacting software products. In the end, their AI message was a somewhat of a disappointment, which was reflected in their stock back peddling.

After overcoming an initial drop, the major indexes recovered and scored moderate gains across the board, despite the wild ride Small Caps participated in. The MAG7 group went sideways, bond yields crept higher, and the dollar bounced and trounced but closed up.   

Gold found a bottom and rebounded, Bitcoin rallied to $70k but pulled back, while crude oil built on recent bullish sentiment and added over 3% but fell just short of reaching $78.

Another divergence could signal trouble for the markets, as ZH pointed out, when looking at the S&P 500, namely the Cap-weighted vs. the Equal-weighted version. This is the largest gap since the peak in 2008/09.   

Hmm. How long can this last?

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ETFs On The Cutline – Updated Through 06/07/2024

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. 266 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 June 7, 2024

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

STRONG JOBS REPORT SHAKES RATE CUT DREAMS, BOND YIELDS LEAP

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Traders’ dreams for an interest rate cut were dashed this morning, as the jobs report came in stronger than expected. Nonfarm payrolls allegedly increased by 272k last month, considerably above expectations of 190k and April’s 175k. Oddly enough, the unemployment rate increased to 4%.

Wall Street had been wishing for weak numbers in anticipation that the Fed might step in and loosen up its interest rate policy. This stronger performance will likely limit them in following the footsteps of the Bank of Canada and ECB, unless other pertinent data point to more widespread economic difficulty.   

Bond yields surged on the news with the 10-year up some 14 basis points to 4.44%. Despite the disappointment, bullish sentiment prevailed with the major indexes recapturing their unchanged lines, vacillating around them but then dumping into the close.

Overall, weaker than expected economic data pulled the Citi Economic Surprise index lower, making today’s payrolls report an outlier and questionable. Looking under the hood, it turned out, as ZH reported, that in the past year 1.2 million full-time jobs have been lost and replaced by 1.5 million part-time jobs.

As far as the month of May 2024 is concerned, 625k full-time jobs were lost in one month, replaced by 286k part-time. And, as I reported yesterday, the change in employment since December 2019 looks like this.

Rate cut expectations dropped, the Nasdaq outperformed for the week, as Small Caps were punished and the most shorted stocks retreated. However, the MAG7 group rallied for the 6th week out of 7.

Bond yields, after slipping for 4 days, spiked today, which propelled the dollar higher, but pulled the rug out from under gold, which headed back down to its early May lows. Bitcoin followed suit and surrendered its gains from the last few days.

Crude oil prices recovered from Monday’s dump, but global liquidity seems to have disappeared and created an untenable situation, as this chart demonstrates.

Hmm, who will end up being the loser?

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 06/06/2024

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, June 6, 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 +6.88% and is in “Buy” mode as posted.

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Wall Street Waits With Bated Breath: May Jobs Report To Set Fed’s Course?

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The markets predominantly trod water after the S&P’s fresh record close, with traders’ eyes now focused on tomorrow’s jobs report.

Friday’s non-farm payrolls report for May will be analyzed carefully, because any weakness in the labor force will freshen hopes that the Fed might indeed cut rates. Expectations are for 190k in new jobs created.

Optimism prevails on Wall Street that the economy is still doing well, despite much evidence to the contrary. A cooling job market will be hard to reverse once it starts, which is why traders believe a rate cut is on the horizon.

More pressure will be on the Fed after the Bank of Canada cut rates by a measly 0.25%, which was followed this morning by the ECB. That tiny reduction appears to be more like a market pleasing goodwill gesture rather than a serious effort. Remember, all Central Banks are walking a tightrope, because lowering rates to save failing economies will stoke inflationary fires.

Tech darling Nvidia’s upward momentum got crushed during this session, with the company losing some $175 billion in market cap. Gold and silver picked up on the BoC and ECB rate reductions and continued their upward swing.

In terms of the US Labor market, which has been horrendously weak, it was now confirmed what ZeroHedge pointed to a more than a year ago, namely that all the job growth in the past few years—drumroll—has gone to illegal aliens.

I leave it up to you to ponder this chart and arrive at your own conclusions:

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)

The ECB followed in the Bank of Canada’s footsteps and lowered its main interest rate by 0.25% as well. The major indexes traded sideways, with tomorrow’s potentially market moving jobs report lurking on deck.

Our TTIs offered a mixed picture, as the international one advanced, while the domestic one slipped slightly.

This is how we closed 06/06/2024:

Domestic TTI: +6.88% above its M/A (prior close +7.08%)—Buy signal effective 11/21/2023.

International TTI: +9.29% above its M/A (prior close +8.89%)—Buy signal effective 11/21/2023.

All linked charts above are courtesy of Bloomberg via ZeroHedge.

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