The Fed Blinks—Again; No Rate Hike Propels Indexes

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks rallied as the Nasdaq closed at a new record high after the Federal Reserve opted to leave interest rates unchanged but stressed that the case for a hike in rates has “strengthened”.

In its statement, the Fed said the “case for an increase in (short-term) rates has strengthened” but that the Fed “decided, for the time being, to wait for further evidence of continued progress toward its objectives” of full employment and inflation moving back up to its 2% target. The announcement to hold interest at bay came as no surprise, and the hint at a possible hike in December is in line with most analysts’ expectations.

The biggest losers after the news from the Fed today?  Bank stocks. Eight of the Ten worst performing stocks today included lender Navient (NAVI), Regions (RF) and Vank of America (BAC). Those invested in bank stocks have been hoping the fed will boost rates sooner than later, giving the banks a chance to charge more for loans before the demand for loans decreases. It looks like they will have to wait until December.

Crude oil was a big winner today. The black gold climbed $1.57 to close at $45.62 a barrel. While the daily gain is notable, the fact that oil still remains in limbo between $40-50 a barrel is giving investors a headache. Just four months ago, many thought that oil would climb over $50 a barrel and remain there after the summer. However, that never happened. Over-supply still remains the name of the game in the world of oil and it doesn’t seem that will change anytime soon.

In regards to interest hikes and the Fed crying “wolf” again, the following is a spot on demonstration of where we are at.

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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 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) jumped as the Fed remained accommodative by leaving interest rates unchanged. Let’s wait and see if this was only a euphoric reaction or the beginning of a more sustainable rally.

Here’s how we closed 9/21/2016:

Domestic TTI: +2.45% (last close +2.05%)—Buy signal effective 4/4/2016

International TTI: +4.79% (last close +3.63%)—Buy signal effective 7/19/2016

Disclosure: I am obliged to inform you that I, as well as my advisory clients, own some of the ETFs listed in the above table. 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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