Earnings And Acquisitions Support The Indexes


[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

The S&P touched a two-week high as acquisitions and mergers confirmed to some that, despite hugely elevated market levels, untapped value still exists, although that is clearly in the eye of the beholder.

Expected annualized earnings are supposed to have been risen 1.1% last quarter, which is an improvement after four quarters of contraction. On one hand, this is a positive, however, on the other one also has to look at the fact that the major indexes hovering at extremely high levels, thanks to the Fed’s easy monetary policy, and are already evaluated way higher than underlying economic data would warrant. So, how much upside is left?

A potential fly in the ointment was the crash of China’s currency to all-time lows. When that has happened in the past, as in August 2015 and January 2016, stock markets have followed south and gone into meltdown mode. Will it happen again? Since no one has the answer, we’ll have to wait and see how that theme plays out and if there will be a fallout effect prior to the US election.


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One Man’s Opinion: The Chart That Gives Citi “The Chills”

OneMan'sOpinionBy ZeroHedge

Two weeks ago, HSBC’s Murray Gunn warned of “ominous signs” exuding from the US equity markets. This weekend, Citi’s Tom Fitzpatrick confirmed the concerns exclaiming Travolta-esque “[we’ve] got chills [about the market], and they’re multiplying… and they’re losing control.”

While fully realizing that you can find a lot of similar overlays if you look hard enough…this one gives us “the chills”.

At a time when we have seen:

– Elevated concerns about Europe and its banks (possibly even creating some US/Europe conflict)

– The most polarizing US Presidential election in modern times

– Increased “taper talk” emanating from Japan and Europe and rising concerns about the efficacy of the Central bank policy around the World and the possibility it becomes unhinged.

– A 20 basis point move in US 10 year yields in 5 days;

– A 16% move in Oil in 7 days;

– A $90 move in Gold in 9 days;

– A chart on USDCNY that looks to be breaking to the topside and a huge GBPUSD move overnight in minutes

Is this the next shoe to drop?


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ETFs On The Cutline – Updated Through 10/21/2016

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 254 (last week 254) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line 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 October 21, 2016

ETF Tracker StatSheet




Market Commentary


[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

The major indexes ended up just about unchanged with the exception of the Nasdaq which eked out at +0.30% gain. Energy and Healthcare fell while Microsoft and McDonald’s kept the markets propped up. Still, questions keep coming up as to whether the lack of pace with regards to economic activity can justify the current lofty equity levels.

As I have repeatedly posted, macro data have been on a downward slide for a couple of months now, and it’s just a matter of time when the major indexes have to adjust to that reality. Of course, with Central Banks manipulating markets higher, there is no way of knowing when that moment of truth will arrive. Here’s the visual, thanks to ZH, in regards to the divergence between the S&P 500 and current US Macro data:


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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 10/20/2016

ETF Data updated through Thursday, October 20, 2016


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


Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in the above chart) remains above its long-term trend line (red) by +1.47% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.


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Volatility Increases As Crude Oil Crumbles


[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

Markets were a little chaotic early in the session as the major indexes had rallied and then collapsed below the trend line very quickly as the chart above shows. Slowly but surely, we recovered, touched the unchanged line a few times but ended up closing slightly below it.

Economic data points continued their downward path with jobless claims jumping the most in over 5 months, existing home sales growth stalling (yet prices kept rising) while consumer confidence slipped to the lowest since last year. In other words, the economy is going nowhere fast.

Over in Europe, the ECB disappointed by not considering a QE extension beyond March and Draghi announcing that “extraordinary policy support won’t exist forever.” Of course, things in Europe work the same as here in the US and bad market news ended up being good news, as an early sell off was followed by a broad recovery with the German DAX closing up +0.52%. Go figure…


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