One Man’s Opinion: David Stockman Offers “More Proof Of Janet Yellen’s Idiocy”

Authored by David Stockman via The Daily Reckoning,

During the last 129 months, the Fed has held 86 meetings. On 83 of those occasions it either cut rates or left them unchanged.

So you can perhaps understand why Wednesday’s completely expected (for the last three weeks!) 25 bips left the day traders nonplussed. The Dow rallied over 100 points that day.

Traders understandably believe that this monetary farce can continue indefinitely, and that our Keynesian school marm’s post-meeting presser was evidence that the Fed is still their friend.

No it isn’t!

Janet Yellen’s sing-song gibberish was the equivalent of a monetary DEFCON 1, alerting all except the most addicted Kool-Aid drinkers to get out of the casino.

Our monetary politburo has expanded its balance sheet by a lunatic 22X during the last three decades and in the process has systematically falsified financial asset prices and birthed a mutant debt-fueled of simulacrum of prosperity.

But once it begins to withdraw substantial amounts of cash from the canyons of Wall Street as per its newly reaffirmed “normalization” policy, the whole house of cards is destined to collapse.

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ETFs On The Cutline – Updated Through 03/24/2017

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 221 (last week 224) 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 March 24, 2017

 

ETF Tracker StatSheet

http://www.theetfbully.com/2017/03/weekly-statsheet-etf-tracker-newsletter-updated-03232017/

HEALTH CARE BILL FAILS; MARKETS SINK

[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

In a repeat performance of yesterday, an early rally stalled and reversed leaving the major indexes about unchanged for the day but down for the week with the S&P 500 surrendering some -1.4%.

As I mentioned throughout the week, the most widely watched news event was the path of the health care bill and whether Trump could muster enough votes in his own party to get the legislation through congress. The answer was finally revealed, before the markets closed, as Republicans pulled the bill prior to the voting procedure admitting that it could not get passed in its present form.

That leaves the question as to what market reaction might be come next week. On view is that this is an ominous sign for Trump’s ability to push through his economic agenda while, on the other hand, you could argue that, with this monkey off his back for the time being, other things that are not as complicated like lowering taxes and reducing regulations, might be more doable.

Market internals looked like this: This is the Dow’s longest losing streak (7 days) since election. Small Caps had their worst week since February 2016. The S&P 500 had its worst five trading days since November while the Financials suffered their worst week since January 2016.

The greenback continued its slide for the 8th losing day in a row, which is the longest losing streak for the Bloomberg Dollar Index since April 2011. Treasury yields dropped on the week, despite the Fed’s rate hike on 3/15, which gave bond investors a reason to cheer as bonds finally rallied. Gold was the winner again, and the precious metal is now up for 2 weeks in a row, its best 2-week period since Brexit in 2016.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 03/23/2017

ETF Data updated through Thursday, March 23, 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 +2.31% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Hope Rally Fails As Health-Care Bill Vote Is Delayed

[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

One look at the above chart shows the type of roller coaster ride the major indexes went through resulting from continued uncertainty about the outcome of the health care vote. In the end, hope of a passage got crushed as the vote got postponed on doubts that it can pass handing Trump a defeat, as his own party appeared to be split on the battle to repeal and replace “Obamacare.” The vote is now tentatively planned for Friday.

The major indexes gave back early gains and ended up slightly in the red, which was the Dow’s sixths straight day of losses. How wild was the ride? ZH summed it up nicely:

  • 0855 Drop – Freedom Caucus Meeting postponed
  • 0930 Rally – Brady – 95% agreement of health bill
  • 0940 Drop – Brooks – 30-40 “no” votes still
  • 1030 Rally – Freedom Caucus Meeting
  • 1300 Drop – Freedom Caucus Meeting ends with no agreement
  • 1330 Rally – Spicer press conference confirms vote will take place tonight
  • 1505 Drop – Ryan Press Conference Postponed
  • 1520 Rally – Trump “we have a chance”
  • 1530 Drop – House delays vote on health bill amid doubts it can pass
  • 1557 Rally – Freedom Caucus committed to working with the President

 

In the end, the gap between fact and fiction actually narrowed a little as the chart below shows:

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Upcoming Healthcare Vote Keeps Markets In Check

[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

Since market participants did not show much commitment one way or the other, the major indexes ended up hovering slightly above and below the unchanged line but managed to close slightly above it except for the Dow, which gave back a tiny -0.03%. Considering yesterday’s sharp selloff, today’s lack of follow through to the downside was an encouraging sign for the bulls in that there may be more upside potential ahead.

The choppiness and uneasiness was caused by uncertainty not only about Trump’s struggle to push through his healthcare bill, with a vote looming on Thursday, but also his ability to successfully promote his promised tax cuts, which were the main cause of the record breaking rally since November.

Interest rates continued their march south as the 10-year US Treasury yield dropped from a recent high of 2.62% to 2.40% meaning that bonds went back into rally mode during the past 1.5 weeks. The dollar slipped again following the recent downward trend, which started in early March, thereby helping gold to score its 5th day of gains in a row and closing above $1,250.

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