ETFs On The Cutline – Updated Through 04/28/2017

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 252 (last week 256) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line (%M/A) 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.

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ETF Tracker Newsletter For April 28, 2017

ETF Tracker StatSheet

http://www.theetfbully.com/2017/04/weekly-statsheet-etf-tracker-newsletter-updated-04272017/

MARKETS EKE OUT A GAIN DURING THE LAST WEEK OF THE MONTH

[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

The aimless meandering to the downside during the first 3 weeks of April is now in the rear view mirror as the last 5 trading days combined to pull the markets above the unchanged line for the month, or +0.9% in the case of the S&P 500. This week turned out to be the best for stocks for the year, although volume was abysmal for the past two days.

Hard to make some sense out of that fact as economic performance, when measured by the GDP, collapsed to an embarrassing 0.7%; and that is the officially admitted number, which makes me wonder if the real one is still on the positive side of the ledger.

In the end, technology was April’s winner, energy turned into the big laggard, while the Dollar index headed south for the 2nd month in a row. As I mentioned before, the banks continued slipping and are down ever since Trump announced his tax plan. Interestingly, the 30-year yield hit its glass ceiling (the 3.00% level) five times this week without breaking through confirming the theme that higher rates continue to be on the horizon.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 04/27/2017

ETF Data updated through Thursday, April 27, 2017

Methodology/Use of this StatSheet:

  1. From the universe of over 1,800 ETFs, I have selected only those with a trading volume of over $5 million per day (HV ETFs), so that liquidity and a small bid/ask spread are assured.
  2. Trend Tracking Indexes (TTIs)

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.

  1. All other investment arenas do not have a TTI and should be traded based on the position of the individual ETF relative to its own respective trend line (%M/A). That’s why those signals are referred to as a “Selective Buy.” In other words, if an ETF crosses its own trendline to the upside, a “Buy” signal is generated. Since these areas tend to be more volatile, I recommend a wider trailing sell stop of 7.5% -10% depending on your risk tolerance.

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

Click on chart to enlarge

Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in the above chart) is positioned above its long-term trend line (red) by +3.32% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Nasdaq Hits A New Record; Dow & S&P 500 Unchanged

[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

Earnings were in the spotlight and threw an assist to the Nasdaq pushing it into record territory, while the Dow and S&P 500 drifted and barely closed above the unchanged line. Despite the gains by companies like Comcast, PayPal and Intuit, the market had to deal with a menu of uncertainties (hat tip to ZH for this summary):

  1. Disappointing hard and soft data
  2. Growing government shutdown fears
  3. Collapsing GDP expectations
  4. Declining earnings expectations
  5. Plunging Crude Oil
  6. North Korea threats

The recent levitation of the Nasdaq helped SMH, a semi conductor ETF, which is part of our “10 ETFs in the Spotlight” (section 2 below), to continue its rally with a YTD gain of almost 13% and remaining the leader of the pack.

The US dollar went sideways but managed to close up +0.09%, gold gained a tad while the 20-year Treasury bond slipped a tiny -0.03% as interest rates closed higher. The major banks ended up lower ever since Trump announced his tax plan.

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Diving Into The Close

[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

The old adage “buy the rumor and sell the fact” certainly rang true today as the upward momentum of the past couple of days continued early in the session in anticipation of Trump’s mother of all tax cuts. While the actual announcement confirmed some leaked information, some analysts considered the tax plan a “wish list with no details.” You can read highlights of the proposal here.

While Trump’s announcement had a questionable effect on the markets there were others that certainly raised eyebrows. Case in point was the crashing of Canada’s housing bubble as its biggest mortgage lender, Home Capital Group, exploded and its stock price tumbled by 61%. Other home lenders joined the party and were dragged down as well. These are banking institutions, which means that depositors that jogged to the bank yesterday are now in a full on sprint.

The major indexes went into retreat mode and stumbled into the close and ended up slightly in the red, while the 20-year Treasury bond (TLT) rallied, as interest rates retreated, and gained +0.55%. Bucking the trend were SmallCaps (IWN), which ended up +0.30% and Aerospace & Defense (ITA) with +0.21%.

The US dollar managed a rebound of +0.28% but remains firmly stuck not only below its psychologically important 100 level but also below its 6-month support line, namely the 200-day M/A.

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Earnings And Tax Cut Hopes Drive Markets

[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

Caterpillar and McDonalds combined to continue yesterday’s rally with Trump’s planned tax cut announcement, scheduled for tomorrow, providing the emotional fire power. The Nasdaq managed to conquer the 6,000 level and closed solidly above it in part due to gains by heavyweights Apple and Microsoft.

So far, overall profits of S&P companies are estimated to have risen 11.4% in the first quarter, which would be the most since 2011. However, the devil always is always in the details, although these days the only thing that matters is the headline number. Case in point is Caterpillar and its “tremendous earnings growth” which, when taking out adjustments and looking at real GAAP EPS, shows an entirely different picture as you can read here.

The last couple of days have been extremely painful for those professional investors (and amateurs) who had accumulated short positions. They were squeezed and most had to cover, meaning they had to buy offsetting long positions to cover their shorts, thereby contributing to the bullish theme of this week.

Short interest is measured and is considered the secret sauce that can extend a bull market’s life. However, the latest numbers showing short interest for the market’s most liquid ETF (S&P 500) having currently dropped to levels not seen since May 2007 just prior the S&P’s top and free fall. This begs the question as to how much ammunition will be left to have any effect on the next short squeeze, which will be needed to push equities higher.

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