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 292 (last week 288)
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
record setting pace continued with all major indexes scoring impressive gains.
The S&P 500 managed to add almost 2% in the past five trading days alone
and has traded now 70
straight days without a 1% loss.
some econ numbers were less than impressive, Housing Starts surged
16.9% MoM to the their highest since 2006, despite a sharp drop in Permits, which
shrank -3.9% MoM, far worse than the -1.5% expected.
Street simply remains in rally mode with weak data being ignored, and strong ones
being used to boost stocks to ever higher levels. Regarding the above housing numbers,
it’s important to note that they are one of the more critical metrics used to evaluate
the health of the economy, while the Fed’s low interest rate policy keeps the
buying interest up.
as ZH pointed out correctly, stocks have reached most expensive and most overbought
levels, which even surpass the DotCom bubble. This is a bull market on steroids
thanks to the loose Central Bank policies, as I have pointed out before.
overdue for a correction, but this being an election year, whatever the powers
to be can do will be done to keep the markets elevated. After all, when it
comes time to cast your vote, you will vote based on how you feel about the economic
now, the markets give the feeling of being one giant party; and we will dance
along but stay as close to the exit doors as we can.
updated through Thursday, January 16, 2020
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
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 Termsand 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 +9.49% after having generated a new Domestic “Buy” signal effective 2/13/19 as posted.
While yesterday’s initial market reaction to the signing
of the Phase-1 US-China trade deal was merely a yawn followed by a modest
sell-off, today things looked different.
Optimism was soaring with the major indexes scoring new
record highs, as traders had a chance to digest the trade truce. The 96-page agreement
lays out that China is supposed to purchase $95 billion more in US commodities
than in 2017, and roughly more than $100 billion in manufactured goods and
services, according to MarketWatch.
However, as always, doubt exists whether this agreement can
lead to a lasting accord, as the Phase-2 negotiations are being prepared. But,
for right now, the markets are pleased that expectations have been met. Also throwing
an assist was the Senate approval of a new trade deal between the U.S., Mexico
and Canada, along with a huge short
On the economic front, things took a turn for the better with
the Philly Fed Business Outlook spiking from a revised 2.4 to 17, which was far
above expectations of 3.8. Then December Retail Sales surprised to the upside,
despite an Online Sales slowdown, according to ZH. Ex-autos, the index surged
0.7% vs. and expected 0.5% rise.
Of course, all of this pales compared to the real reason
for the ongoing market levitations, namely the growth of the Fed’s balance sheet,
chart shows. To be clear, it’s not just the Fed, but all Central Bank policies
in unison, that seem to push equity prices to ever higher levels.
The major indexes recovered from an early slide, headed
higher and touched new records, when news of trouble in the US-China deal put
an end to the bullish theme and south we went.
Despite all efforts of regaining lost territory, the
S&P and Nasdaq ended up moderately in the red, while the Dow was able to hang
on to a green close.
Casting the shadow over the markets, and causing the
mid-day stumble, were doubts about the extent of China import tariff reductions
of goods coming into the U.S., which are likely to stay in place until after
election time. In addition, Bloomberg reported that “any move to reduce them
will hinge on Beijing’s compliance with the terms of the Phase-1 trade accord.”
That was enough for a trend reversal with the Dow losing
its 29k level.
The rebound rally early on received an assist from good earnings
reports by banking giants JPMorgan and Citigroup, with especially the former
blowing out expectations, while Wells Fargo disappointed.
I expect to see some more bobbing and weaving in the markets,
depending on the latest earnings news, and even the actual signing of the first
portion of the US-China trade agreement could very well be met with a yawn and
treated as a non-event.
Over the last few years I have received over 350 questions and answered about everything from ETF investing to various investment strategies. I invite you to check them out. Maybe you’ll find answers to questions you have or you might even find questions you hadn’t thought of asking. You can find my Q & A archive here.
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