ETFs On The Cutline – Updated Through 02/15/2019

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 189 (last week 109) 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 15, 2019

ETF Tracker StatSheet

https://www.theetfbully.com/2019/02/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-02-14-2019/

U.S.-CHINA TRADE EUPHORIA POWERS MARKETS

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Hope and euphoria, that progress between the U.S. and China trade negotiators will continue, combined forces to drive the major indexes further into lofty territory.

Fundamentals don’t seem to matter, and the potentially soft GDP number, in part caused by a collapse in retail sales, appears to be just an afterthought. Even the US Macro Surprise index did its best imitation of a swan dive thereby disconnecting from current market levels.

All that mattered today was expectations for further talks appear real, despite the warring parties being far apart on key trade issues. Nevertheless, negotiations concluded today and are set to resume next week in Washington, which was interpreted as a sign that both sides are eager to reach a settlement prior to the March 1 deadline.

Helping matters were reports from the White House describing the talks as “detailed and intensive” and “progress between the two parties.” Even Trump’s declaration of a national emergency could not stop the computer algos’ relentless market push higher with an extra shove into the close.

For sure, it’s been a roller coaster ride. After the S&P 500 having shown its worst quarter (Q4 2018) in many decades, it now has stormed back to notch its best start to a year since 1991.

It reached this week what I call the break-even point. This simply means that, since our domestic ‘Sell’ signal on 11/15/18, it arrived at the point in time where those buy-and-hold investors made up all their losses from last quarter. So, for us trend trackers, nothing was lost, and nothing was gained.

Today’s gains propelled out International TTI above its long-term trend line and into bullish territory. Here too, I will wait a few days to see if this level holds before issuing a ‘Buy’ for that sector.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 02/14/2019

ETF Data updated through Thursday, February 14, 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 +1.83% after having generated a new Domestic “Buy” signal effective 2/13/19 as posted.

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Dropping And Popping

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Equities took a hit early this morning with the Dow falling over 200 points, despite a generally optimistic view of the alleged progress made with the U.S.-China trade negotiations.

Casting a dark shadow on economic fundamentals was a report showing that US retail sales had simply collapsed in December (-1.2%), which resulted in the biggest drop in a decade. Trump’s chief economic advisor, Larry Kudlow, was quick to blame a “glitch” without adding a meaningful explanation.

As a result, the S&P 500 dropped below its all-important 200-day M/A again but reclaimed that level later in the day, when a mid-day rally pushed the index above its unchanged line. In the end, the major indexes sold off into the close but reduced the morning losses to a fraction of a percent. The Nasdaq was the exception, as it managed to eke out a tiny gain.

For sure, the lousy retail sales number is bound to affect the Q4 GDP number, with expectations now tumbling, as this chart shows. Some are forecasting a print in the low 1% range vs. the widely hoped for 3%.

Our Trend Tacking Indexes (TTIs) changed only slightly, and we are waiting for more upside momentum to propel the International TTI into bullish territory as well.

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Extending The Winning Streak

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Yesterday’s bullish momentum continued through the early morning when, suddenly, the trend reversed, and equities stumbled lower.

The catalyst for this turnaround came from Marco Rubio, who followed through on yesterday’s threatening tweets that he will soon be filing a bill to change the taxable status of what ZH termed “the only thing that is keeping stocks afloat,” namely corporate buybacks.

ZH then succinctly summed up the rollercoaster day like this:

US equities drifted higher overnight, surged at the cash open, dumped on Marco Rubio’s tweet about taxing buybacks, then ramped back to the highs – because, well… just because…. and then faded as Trump asked Congress for more funding in the border bill…

Still, the bulls remained in charge as the S&P 500 opened and closed above its 200-day M/A for the first time since December. Today’s action confirmed yesterday’s domestic ‘Buy’ signal, so I pulled the trigger and bought some low-volatility ETFs in my advisor practice.

We’ll have to wait and see if upward impetus is maintained before looking for further opportunities in domestic equity ETFs. Our International TTI has now also reached a level that is within striking distance of a new ‘Buy,’ which could very well materialize within the next few days.

Stay tuned…

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Breaking Out To The Upside; Domestic TTI Signals A ‘Buy’

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The markets shifted into overdrive supported by nothing more than news of a tentative deal that would keep the government from being shut down for the second time this year. Of course, as we all know, Trump’s border wall funding, or rather lack thereof, had been a stinging point between Republicans and Democrats.

The new but not final arrangement would include 55 miles of border fencing and involve far less money than Trump had demanded. The latest headline said that he was not happy with it, but did not yet reject it, but his approval is needed for this arrangement to go through.

To the computer algos, it did not matter whether there was a deal or not, they simply pumped the indexes higher. Throwing an assist was optimism (not fact) that the trade negotiations between China and the U.S. were progressing positively with more high-level discussions on deck for Thursday.

In the end, the major indexes closed solidly higher with the S&P 500 finally conquering his 200-day M/A and closing slightly above it. Our Domestic Trend Tracking Index (TTI) jumped and closed above its trend line for the 3rd day in a row. The odds of a resumption of the prior bull market have increased, thereby generating a new ‘Buy’ for “broadly diversified domestic equity ETFs.”

Of course, you can never be sure if this the beginning of a race to take out the old highs or simply another head fake. To minimize the effects of the latter, here’s how I approach it in my advisor practice:

  1. I will watch market activity for a couple of hours tomorrow morning to see if the trend remains steady, or if there is a giant sell-off in the making. If the major indexes are heading back south again, I will wait another day before making a commitment.
  2. If sentiment is stable, I will look for partial exposure in low-volatility equity ETFs that have shown good performance and a better than average resistance to sell-offs.

If you follow along, you can also use my Thursday StatSheet to select ETFs that meet your risk tolerance. Once this ‘Buy’ signal is underway, I will update the 10 ETFs in the spotlight.

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