ETFs On The Cutline – Updated Through 02/22/2019

Below, please find the latest High-Volume ETF 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 322 High Volume ETFs, defined as those with an average daily volume of more than $5 million, of which currently 222 (last week 189) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line (%M/A) 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 February 22, 2019

ETF Tracker StatSheet

https://www.theetfbully.com/2019/02/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-02-21-2019/

A SEA OF GREEN; TRADE TALK OPTIMISM IS ALIVE AND WELL

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

It sure seems that complacency rules supreme when it comes to market behavior with yesterday’s bad news, when a bombardment of economic data missed, either being forgotten or at best can be seen in the rear-view mirror. Trade talks between U.S. and China are current front-page news—not much else seems to matter.

Northman Trader summed it up like this:

Bad data doesn’t matter because stocks go up. A China deal will be positive and a catalyst to buy stocks. If there is no real China deal a cosmetic one is good enough. Since bad data doesn’t matter any good data is bullish too. In short, bad news is good news and good news is good news.

 It’s blind faith in a system that never has to face any consequences as the central bank put reigns supreme.

Be that as it may, equities opened in a sea of green across world markets thanks to the usual support cast, namely optimism about the trade talks.

The major indexes vacillated above the unchanged line and were never in danger of breaking it to the downside, despite a short-lived mid-day pullback that seemed to do nothing but strengthen the bullish resolve.

The Dow managed to reclaim its 26k level and close above it, while the S&P 500 stormed higher, but did not quite reach its major overhead resistance area, namely the 2,800 zone.

Still, despite this levitation to ever new heights, I wonder if eventually fundamentals, on which stock prices are really based, will kick in and take the starch out of this exuberance. After all, forward earnings are collapsing while the US Macro Surprise Index is not in sync with the S&P 500.

But all that matters right now, however, is the long-term trend, which is up and supported by our Trend Tracking Indexes (TTI). It confirms that the bull is alive and well—at least for the time being.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 02/21/2019

ETF Data updated through Thursday, February 21, 2019

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 02/13/2019

Click on chart to enlarge

Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in the above chart) is now positioned above its long-term trend line (red) by +3.03% after having generated a new Domestic “Buy” signal effective 2/13/19 as posted.

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Trade-Talk Optimism Meets Weak Economic Data; Equities Stumble

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Despite continued trade talk optimism, the markets were not able to gain any footing and never managed to climb back above the unchanged line. Weak economic data points supported the bearish mood, but it was not enough of an early drop to keep me from executing our International ‘Buy’ signal by purchasing a low volatility global ETF.

Domestic economic news was negative all the way around but, surprisingly, the equity pullback was moderate with the major indexes surrendering less than -0.50% with global markets doing even better.

Here’s what made headline news:

Durable-goods orders rose 1.2% but failed to meet expectations of 1.4%.

A key measure of business investment, known as core orders, slipped -0.7%.

Manufacturing activity tumbled while leading indicators headed south by -0.1%.

Existing home sales fell -1.2% in January, its third straight month of declines

It will be interesting to see to how far the “trade news headline ping-pong” can carry this market before traders become impatient and reverse their bullish attitude. However, the latest statement disclosed that U.S. and Chinese negotiators are in the process of outlining a proposal to end the endless tit-for-tat.

I had to laugh when ZH reported this:

So, with earnings season almost done and no economic news tomorrow, can traders relax for a bit? Hardly: expect headlines from the ongoing US China trade talks to start leaking over the next few hours, while tomorrow’s barrage of Fed speakers (8 of them) virtually assures that the market will be talked higher come hell or high water.

In the meantime, both of our Trend Tracking Indexes (TTIs) remain on the bullish side of their respective trend lines thereby supporting our current ‘Buy’ signals.

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Fed Minutes Keep Markets Wandering; International ‘Buy’ generated

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The much-anticipated Fed minutes (from their January meeting) showed that officials were divided on future interest rate hikes. One side argued that an increase might only be needed if inflation would exceed their baseline forecast. The other side thought it would be appropriate to hike later this year, if the economy behaves as expected.

Fed officials admitted that their U-turn on policy in December, which pulled the markets out of the doldrums, was necessary due to a more uncertain economic outlook and a tightening of financial conditions.

There was nothing earthshaking in these revelations, so the major indexes see-sawed around their respective unchanged lines but were able to maintain their upward bias by closing fractionally in the green.

Technically speaking, the S&P 500 faces major overhead resistance at the 2,800 level, which has also been called a quadruple top. It may take some serious effort and several attempts, supported by “awesome” headline news, to break through this glass ceiling.

Our Trend Tracking Indexes (TTIs) remain in bullish territory with the International one now having established itself firmly above its trend line thereby generating a new ‘Buy’ for “broadly diversified international ETFs.” Please see section 3 below for details.

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Trade Talk Hope Keeps The Bullish Theme Alive

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

After briefly meandering below the unchanged line, the major indexes found some upward momentum and ended up closing modestly higher—although on very low volume.

A couple of assists helped to keep the bullish theme going.

First, Cleveland Fed President Mester helped the markets higher by suggesting that the Fed should pause its balance sheet runoff, AKA Quantitative Tightening (QT), thereby keeping negative market effects to a minimum.

Second, the latest trade-related news came from Trump when he announced the March 1 “hard deadline” for raising tariffs on $200 billion of Chinese goods is not a “magical date” for reaching a deal with China.

He further insisted that the talks are going “well” even though there has been no evidence presented that the parties have even reached a memorandum of understanding. So, the jawboning continues with the computer algos ready to act on nothing but headline news in the hope to push the S&P 500 through the 2,800 level.

While our Domestic Trend Tracking Index (TTI) remains solidly on the bullish side of its long-term trend-line, the International one inched higher and stayed above its respective line now for the second day, although by only a small margin.

We need to see a little more staying power, before I will pull the trigger and announce a new ‘Buy’ for this arena as well.

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