One Man’s Opinion: The Equation That Explains It All

OneMan'sOpinionAuthored by Mark St.Cyr,

If you were just woken from some form of suspended animation from let’s say 2010 (ancient economic history in today’s terms) then informed of the current state of global political affairs and upheavals, U.S. employment (95+million not,) global currency gyrations, interest rates at not only 0% but some -0%, threats of escalating wars, threats of major confrontational war, GDP of the major global economies not only contracting, but below statistical stagnant, governments, as well as central banks with balance sheets of debt calculated in $TRILLIONS, some in the 10’s of, all financed at near or below 0%, and the Fed is only about a week away from raising rates into the teeth of what can only be called “uncertainty,” and much, much more. (There isn’t enough time, or digital ink to list them all.)

Nobody would be surprised if your first reaction based on your prior acumen (the ancient history of 7 years ago whether it be in stocks, business, or both) would to become immediately concerned that whatever portfolio, or wealth you may have had in the markets, may be worth far less today than when you were first put to sleep. And probably becoming ever smaller as you thought about what you might need to do next in order to preserve any that may be left.

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ETFs On The Cutline – Updated Through 01/13/2017

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 237 (last week 234) 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 January 13, 2017

ETF Tracker StatSheet

http://www.theetfbully.com/2017/01/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-01122017/

Banks Pumped And Dumped

Fri pic

[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

Facebook’s 1.36% gain, the result of a stock upgrade by Raymond James, helped push the Nasdaq into record territory; the Dow faded below the unchanged line, and the S&P 500 managed to inch +0.18% higher for the day but gave back -0.1% for the week.

The major banks kicked off earnings season with good results with shares initially surging. The trend reversed later in the session, as banks stocks dumped but managed to end up on the plus side for the day with Wells Fargo closing +1.36% higher while JP Morgan added +0.53%.

The Dow’s tiny dip was caused by heavyweight Wal Mart along with other consumer stocks ending to the downside after reports showed that retail sales increased less than expected during the Holiday season.

According to Reuters, the S&P 500 is trading at 17 times expected earnings which, compared to its 10-year average of 14, leaves plenty of room for a pullback should the Trump euphoria wear thin over the next few weeks. Nevertheless, with the markets being manipulated, and no longer being dependent on fundamentals, I expect another attempt being made at Dow 20k next week before inauguration day on January 20th.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 01/12/2017

ETF Data updated through Wednesday, January 12, 2017

TOC082516

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

TTIClick 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 +1.63% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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The Trump Trade Deteriorates

Thur pic

[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

Things started out to the downside with the S&P 500 sliding almost 1% after Wall Street had some time to digest President-elect Trump’s press conference. Disappointment spread as he chose not to discuss details of his proposed economic policies that were the main driver behind the post-election rally. However, the indexes were magically lifted later on in the session saving equities from their worst day in 3 months.

This brings into question as to whether Trump can actually push his agenda through in a timely manner. If not, there is a high probability that market volatility will increase and with it the possibility of equities giving back some of their gains. After all, markets are in bubble territory when viewed based on economic fundamentals; however, they can stay in the mode until, one day, wishful thinking along with hope give way to reality. Historically, it always does, however, the timing of it is the big unknown.

In economic news, Fiat/Chrysler’s stock price crashed over 14% and trading was halted. The old cockroach theory was verified: If you see one, there are others in hiding. Turns out that Fiat has been accused of engaging in a similar scheme as Volkswagen by using cheating software to beat diesel emissions tests. Makes me wonder who is on deck next.

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A Choppy Session Marked By A Late Rebound

Wed pic

[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

It was a wild ride for the major indexes as they vacillated above and below the unchanged line depending on the words of the moment during President-elect Trump’s first formal news conference since the election.

Case in point was the punishing effect on Biotech/Pharma stocks when Trump opined that that industry “was getting away with murder,” and that “we need new bidding procedures.” That’s all it took and Biotech/Pharma plunged the most since Brexit in June of 2016.

In the end, the S&P healthcare index ended the session down -1% after falling as much as 1.9% earlier on. The Biotech index was not as fortunate and sank -2.96%. That ended a 6-day winning streak for both indexes. Worries about the sector eased later in the session as Trump remained vague about any details on healthcare proposals.

Wall Street is in caution mode due to 2 big upcoming events namely the start of earnings season this Friday and Trumps inauguration a week later on January 20th. We now need to see some evidence that earnings are better than expected and can justify the market’s sugar high and that Trump will be able to deliver on his promises. Any disappointment and it may take a while longer for us to get to Dow 20k.

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