Markets Up—But Stocks Worst Qtr In 4 Years

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks ended sharply higher on the last day of a rough third quarter, but that shouldn’t overshadow the fact that Wall Street still posted its worst quarterly performance in four years, a quarter in which both of our Trend Tracking Indexes (TTIs) closed below their long-term trend lines, and in bear market territory, causing us to go into an all cash position for the time being.

We have now witnessed the first 10% correction in the major stock indexes since 2011, as worries of an economic slowdown in China and angst over interest rate policy and when the Federal Reserve will hike rates has taken a toll.

The rally on Wednesday (or was it a dead cat bounce?) was helped by encouraging news about the labor market. Businesses added 200,000 private sector jobs in September, according to a report by payroll processor ADP.

However grim this quarter has been, many investors are turning the other cheek in saying that solid third quarter earnings reports and stability in China could turn markets around in a heartbeat. Possible, but I just don’t think that hope is a good investment strategy to justify this kind of optimism.

With the bulls clearly in charge on the last day of September, all of our 10 ETFs in the Spotlight rallied with the lead dog being Consumer Discretionaries (XLY) with a gain of +2.66%, while Consumer Staples (XLP) lagged with +0.95%.

2. ETFs in the Spotlight

In case you missed the announcement and description of this section, you can read it here again.

It features 10 broadly diversified ETFs from my HighVolume list as posted every Monday. Furthermore, they are screened for the lowest MaxDD% number meaning they have been showing better resistance to temporary sell offs than all others over the past year.

Here are the 10 candidates:

MaxDD

The above table simply demonstrates the magnitude with which some of the ETFs are fluctuating in regards to their positions above or below their respective individual trend lines (%M/A). A break below, represented by a negative number, shows weakness, while a break above, represented by a positive percentage, shows strength.

For hundreds of ETF/Mutual fund choices, be sure to reference Thursday’s StatSheet.

Year to date, here’s how the above candidates have fared so far:

YTD

Again, the first table above shows the position of the various ETFs in relation to their respective long term trend lines (%M/A), while the second one tracks their trailing sell stops in the “Off High” column. The “Action” column will signal a “Sell” once the -7.5% point has been taken out in the “Off High” column.

3. Trend Tracking Indexes (TTIs)

Our Trend Tracking Indexes (TTIs) finally recovered with today’s rebound, but they still remain stuck on the bearish side of their trend lines by the following percentages:

Domestic TTI: -2.79% (last close -3.63%)—Sell signal effective 8/24/2015

International TTI: -8.30% (last close -10.10%)—Sell signal effective 8/21/2015

Until the respective trend lines get clearly broken to the upside, we are staying on the sidelines.

Disclosure: I am obliged to inform you that I, as well as advisory clients of mine, own some of these listed ETFs. Furthermore, they do not represent a specific investment recommendation for you, they merely show which ETFs from the universe I track are falling within the guidelines specified.

About Ulli Niemann

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