Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 08/22/2019

ETF Data updated through Thursday, August 22, 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.

3. 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 +2.83% after having generated a new Domestic “Buy” signal effective 2/13/19 as posted.

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Riding The Range

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

An early rally fizzled, as uncertainty over the outlook of interest rates kept traders on edge, especially due to the upcoming Fed statement regarding the Jackson Hole meetings. I think Fed head Powell’s position on rates is well known, and his upcoming speech on Friday is likely to disappoint those hoping for more dovishness.

Not helping the markets was an announcement by the German Bundesbank proclaiming that “they don’t see a need right now for fiscal stimulus at this time, even though they expect the economy to shrink again this quarter.”

That was totally opposite of what was expected, and markets started to sag. Then another hawkish nightmare appeared out of nowhere when the Fed’s Patrick Harker opined in an interview that “he doesn’t see any need for further stimulus at the moment.”

Some of his soundbites included:

  1. “Yield curve is only one of many signals.”
  2. “Trade issue makes business decisions difficult.”
  3. “Growth now is exactly what we had anticipated last year.”
  4. “No need for another rate cut, central bank should stay here for a while.”
  5. “Trade resolution would boost growth.”

Ouch. That was not exactly what traders had hoped for, so the markets continued riding the range but managed to eradicate some of the early session losses.

Nevertheless, Fed chair Powell is set to deliver a speech tomorrow, during which investors will be eagerly looking for clues as to whether another rate cut will be on deck for September.

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The Roller Coaster Continues

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Good earnings by consumer heavyweights Target, Lowe’s and Home Depot set the bullish mood early on and pushed equities up to a level that they sustained throughout the session. All of yesterday’s losses were wiped out with the S&P 500 closing exactly at Monday’s price.

The Fed minutes did not offer any earthshaking news other than to confirm that the July rate cut was simply insurance for growth and inflation and considered to be a mid-cycle adjustment. It’s supposed to help counter the effects of weak global growth and trade uncertainty.

Good economic news came from housing sector, as we learned that Existing Home Sales rose YoY and thereby breaking a 16-month losing streak. They came in at +0.6%, while the median sales price also advanced by 4.3% from a year earlier.

Offsetting this good news were reports that the RV industry crashed with domestic shipments to dealers plummeting 20% so far this year, after dropping only 4% for the entire year of 2018. Ouch.

On the global scene, Germany attempted to sell the world’s first 30-year negative yielding bond (-0.11%), which failed miserably. When the dust settled, it turned out that only 824 million Euro of the total 2 billion Euro offering were sold with the Bundesbank now being forced to retain the unsold portion. That’s a big ouch. After all, government bonds need to be sold to cover the ever-growing deficits.

For the week, we saw that Monday was up, Tuesday was down, and Wednesday was up. This rollercoaster may very well continue until the bankers’ Jackson Hole meeting ends on Friday, or the weekend G-7 meeting results, or lack thereof, make their presence felt on Monday.  

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Aimless Meandering—Then A Dive Into The Close

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Numerous attempts by the major indexes to break above their respective unchanged lines were rebuffed, as they ended up diving into the close and breaking a 3-day win streak.

Despite Home Depot’s better than expected quarterly results, the markets struggled for altitude all day with worries about the strength of the US economy, along with political developments in Europe (Italy’s prime minister resigned), weighing on government bonds.

The US 10-year yield slipped again by 6 basis points to 1.55%. In the meantime, Trump continued his assault on the Fed by asking to consider deeper cuts, something like 1%. This contradicts the widely advertised view that we have the “best economy ever.” Well, if we did, interest rates would be rising and not declining, as they have been.

After the 3-day rally, uncertainty affected the mood on Wall Street, as Friday’s speech by Fed head Powell looms large, and you can be sure that every word will be dissected when the bankers’ conference in Jackson Hole ends.

For hints of things to come, traders will be busy analyzing the minutes from the Fed’s July policy meeting, which will be released tomorrow. I expect a wait-and-see attitude to keep the indexes in check till Friday.

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Trade Hope And A Short Squeeze Combine To Keep The Rally Going

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Friday’s rebound did not die today but continued full force thanks to Trump’s successful jawboning about the trade talks. It was more of a concession towards the Chinese telecom giant Huawei, which received a 90-day reprieve, during which it can continue to do business with American companies without needing a case-by-case license.

Reports that Germany may be considering stimulus measures, to pull up their sagging economy, helped the global mood and supported equities for that region. Again, fiscal recklessness is always a positive for equities.

Another big assist came from a giant short squeeze, the biggest in 7 months, which started on Friday and kept bulls happy for the past 2 trading days, as all of last week’s losses have now been recovered.

In the end, despite slightly rising bond yields, the mission was accomplished, and the S&P 500 is now less than 2% away from going green for the month.

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ETFs On The Cutline – Updated Through 08/16/2019

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 199 (last week 206) 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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