Markets In Search Of Support—U.S.-China Trade Deal Collapses

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

It’s now official. The planned tariff increases from 10% to 25% on imported Chinese goods are scheduled to go into effect this Friday. According to Reuters, China has made “systematic edits” to a nearly 150-page draft trade agreement by deleting commitments made previously.

That caused the White House to lose patience with the process, as it appeared that China’s original gesture to compromise was replaced with unwillingness to proceed. So, all the optimistic trade rhetoric we heard over the past few months, that assisted the markets to reach higher levels, vanished instantly as the “reneging” shifted into high gear.

I was surprised to see the markets to react as calmly as they did by bouncing higher throughout the session and showing some green numbers. But, it’s never over till it’s over.

This became clear at the end, when a sudden sell-off brought the indexes back to their unchanged levels, and we closed on a sour note, thereby leaving tomorrow’s market direction wide open to speculation.

Bond yields did an intra-day reversal and spiked after softness early on. The 10-year closed the day 3 basis points higher at 2.49%. Right now, it looks to me that the markets are mired in uncertainty with traders trying to figure out how to deal with the trade dilemma.

Sure, there is always the chance that it will be resuscitated, but that may be more wishful thinking than reality, as the warring parties appear to be digging in their heels. 

2. 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 regarding 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.

For this current domestic “Buy” cycle, here’s how some our candidates have fared:

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 -8% point has been taken out in the “Off High” column. For more volatile sector ETFs, the trigger point is -10%.

3. Trend Tracking Indexes (TTIs)

Our Trend Tracking Indexes (TTIs) weakened but remain on the bullish side of their respective trend lines.

Here’s how we closed 05/08/2019:

Domestic TTI: +4.18% above its M/A (last close +4.35%)—Buy signal effective 02/13/2019

International TTI: +1.69% above its M/A (last close +2.04%)—Buy signal effective 02/21/2019

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 specified guidelines.

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