Seesaw Session Favors Bulls; Short Squeeze Pushes Dow Up 600 Points

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[Chart courtesy of MarketWatch.com]
  1. Moving the markets

It was another wild ride in the markets, as the indexes spent most of the session sharply vacillating around the unchanged line. Volatility picked up and price action was so violent during times that it was almost impossible to get a read on an ETF price for more than a fraction of a second. During the last hour, the shorts were squeezed helping the indexes to move solidly higher.

As ZH reports, the VIX traded above 50 overnight before going dead, crashing, ramping and generally being chaotic. The Dow ended up 568 points but went through some enormous point-swings intraday – from the cash close last night, Dow -1400, +1000, -600, +1100, -500, +400, -300, +600…

In the end, the bulls prevailed, and we saw some nice gains in ETF space along with only green numbers. Leading the group were Semiconductors (SMH +3.68%), Emerging Markets (SCHE +2.84%) and International Equities (SCHF +2.09%). Low man on the totem pole were MidCaps (SCHM +0.84%). Interest rates were climbing again with the 10-year yield adding 2 basis points to 2.79% up from an intra-day low of 2.71%. The US Dollar whip-sawed but closed up +0.21%.

It’s too early to tell if today was the end of this correction. Rapid sell-offs can often be followed by quick and sharp bounce backs, however, as trend followers we are more concerned with the direction of the major trend, which remains up. Needless to say, I did not liquidate any of our potential sell-stop candidates.

  1. 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 and sector ETFs from my HighVolume list as posted every Saturday. 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.

The below 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 our candidates have fared so far:

Again, the %M/A column above shows the position of the various ETFs in relation to their respective long term trend lines, while the trailing sell stops are being tracked 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.

  1. Trend Tracking Indexes (TTIs)

Our Trend Tracking Indexes (TTIs) rebounded nicely as the major indexes staged a sharp rebound during the last hour of the session.

Here’s how we closed 2/6/2018:

Domestic TTI: +2.76% above its M/A (last close +2.11%)—Buy signal effective 4/4/2016

International TTI: +3.95% above its M/A (last close +2.80%)—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.

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