Domestic Buy Signal Generated

Today’s tame CPI report (+0.20% vs. an expected +0.30%) provided enough ammunition for the bulls to drive the major indexes higher. As details about the CPI report became public, namely that gasoline prices fell 1.8% in April, the trading floor erupted with laughter. That goes to show that traders have a sense of humor just like you need to have if you hear numbers like that.

Although the rally faded during the afternoon session (see MarketWatch chart above), the gains were enough to keep our domestic Trend Tracking Index (TTI) above the neutral range with a reading of +1.72%, unchanged from yesterday’s close.

This now constitutes a new Buy signal for diversified domestic equity funds effective tomorrow, Thursday. While we can never be sure if this trend will continue, I will now ease into the market with about 1/3 of portfolio value. Most important after the purchase are my stop loss points.

I will use a 7% trailing stop loss on all positions on a day-end closing price only. Therefore, a sell signal will be generated, if my holdings violate the stop loss points or if the domestic TTI drops below the lower range of the neutral zone, which is a point -1.50% below its long-term trend line, whichever occurs first.

I will post further updates as necessary.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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