Bouncing Below The Unchanged Line

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Sometimes you just have to laugh at some of the market idiocy. Today, we had such a moment when Moderna (MRNA), who issued a press release on Monday, which I discussed, as to how 8 healthy young people did not die when given their latest vaccine.

The obvious stock pump turned into a giant dump today and putting all buyers of the hyped secondary offering under water, as this chart by ZH shows. You think there will be class-action lawsuits?

Added Linette Lopez from Business Insider:

It’s a perfect storm of stupid in the stock market right now.

I can’t wait to see which company will be next in line to promote the latest and greatest for the coronavirus treatment without producing any scientific evidence…

The indexes bounced below their respective unchanged lines throughout the session and scored only minor losses, despite horrific economic data points.

Another 2.44 million filed for unemployment last week, which was slightly worse than the 2.4 million expected. That brings the nine-week total now to 38.64 million jobless, which is massively worse, as ZH put it, than the prior worst nine-week period in the past 50+ years.

As a result, we are now seeing the highest level of continuing claims ever. But what’s even more devastating is that far more Americans have filed for unemployment than jobs gained during the last decade since the end of the Great Recession.

But, as disgusting as this picture truly is, the markets took it in stride with the S&P only dropping some -0.75%, and I am sure a new rally is being prepared and lurking on the horizon. Given that, it almost seems not even noteworthy that Existing Home Sales collapsed to 9-year lows, while China tensions soared.

Keeping the bullish dream alive was another giant short squeeze, which prevented a thorough thrashing of the indexes, although it was not enough of an effort to assure a green close.

Zero Hege concluded that “whatever the Fed, the market and the politicians are doing…it’s not working for sentiment:

Read More

Levitating Higher

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Today, upbeat quarterly earnings results from Target and Lowe’s set a positive tone and sent the major indexes to 10-week highs. However, as soon as news of a bill to delist Chinese companies from the US exchanges cleared the senate, equities came off their best levels of the day.

The focus remained predominantly on the positives of the reopening plans, which vary widely from state to state, but many are trying to lift restrictions prior to the upcoming long Memorial Day weekend.

Throwing a big assist, as we’ve seen often in the recent past, was another giant short-squeeze right after the opening bell, as Bloomberg shows in this chart. This has been the go-to trade ever since the March lows, and it has been executed perfectly.  Also doing some of the heavy lifting were the FANG stocks, which rallied to new highs—again.

The positions of our Trend Tracking Indexes (TTIs) continues to improve, but it will take more of a bullish effort to pull the trigger for a new “Buy” signal. Right now, the S&P 500 (SPY) needs to gain over 2% from current levels, just to get to the point of where our February 27, 2020 “Sell” signal kicked in.

In the meantime, some of our sector ETFs, which run on their own cycles, are showing promising possibilities, and I intend to start nibbling carefully.

Read More

Vaccine Stock Moderna Pops And Then Drops

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

While the jury is still out whether we’re experiencing a bear market bounce or have moved into a new bullish cycle, I was surprised to read that two-thirds of fund managers are saying we’re still in a bear market rally.

I agree with that but will change my mind once our Trend Tracking Indexes (TTIs) generate a new “Buy” signal.

Three-quarters of the fund managers expect a U- or W-shaped economic recovery with just 10% anticipating a V-shape rebound:

This pessimism is reflected in their current allocations, where overweight in defensive assets like health care, cash, bonds rules and cyclical assets like energy, equities and foreign investments are underweight, while emerging markets have been shorted.

In a follow up from yesterday’s ridiculous yet market moving story about Moderna’s coronavirus vaccine press release, and the effect of its result on 8 patients, it was concluded that much of it was simply a media blitz with some allegations of stock manipulation.

“Even the figures the company did release don’t mean much on their own, because critical information — effectively the key to interpreting them — was withheld.”

The pushback was fast and furious with Moderna’s stock dumping not only to session lows but also below its offering price of $76/share.

The rest of the market bobbed and weaved for most of the day until the last hour when heavy selling set in and wiped out just about half of yesterday’s gains, as the fallout from the Moderna saga was too much for the bulls to handle.

After Fed head Powell and Treasury Secretary Mnuchin’s grilling by the senate banking committee, it was Boston Fed Reserve President Rosengren, during a CNBC interview, who through some somber thoughts about the possibly “premature” business re-openings due to Americans continue to content psychologically with the Covid-19 pandemic.

With many traders still erroneously expecting a fast and furious V-shape type of economic recovery, these were the wrong words to utter by an official, and downside momentum accelerated into the close, and we ended up at the lows for the day.

The S&P 500 has now formed a triple-top with strong overhead resistance lurking at the 2,950 level. The earnings divergence in the Nasdaq continued, as this chart by Bloomberg shows, and makes me wonder how long this can go on, namely the Nasdaq being just 5% from record highs, while consensus 12 month Fwd EPS is down 11%? (Hat tip to ZH for this data)  

However, we’re living in times where anything nonsensible is possible, which is clearly supported by these words from Fed chief Powell that they will do “whatever it takes.”

Read More

A One-Two Punch Rockets Markets Higher

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The futures started things out by rallying sharply based on Europe data showing new corona virus cases growing at the slowest rate in months. That was followed by the US markets jumping right after the opening bell, because of drug maker Moderna announcing positive early results from its first human trial of its experimental Covid-19 vaccine.

The press release said:

“All eight initial participants” in the Moderna trial developed neutralizing antibodies to the virus at levels reaching or exceeding those seen in people who have naturally recovered from Covid-19.”

Hmm. Eight participants? And that is a market moving occurrence?

All of this was prefaced by the main event, namely Fed head Powell appearing on CBS’s 60 Minutes and proclaiming, “don’t bet against the American economy,” even though unemployment could rise to 25%.

His thoughts about the likelihood for a rebound of an economy that is showing signs of extreme stress were hopeful but guarded, because a second wave of infections could rattle confidence further. However, his promise “to do whatever it takes,” sparked the greatest opening buying pressure in history this morning, as ZH demonstrates with this chart.

And to clarify, ZH added:

“We soared on the back of Fed fears and promises to print more due to bad news, and we soared on positive vaccine headlines which would end the bad news.”

Powell also admitted that the unemployment rate could shoot up sharply and reach levels not seen since the Great Depression. But he was not worried about a second depression and projected an economic rebound to materialize during the second half of the year.

In the end, it was only his upbeat tone that propelled strocks higher, as well as his insistence that the central bank still is in possession of tools to limit the economic fallout from Covid-19. Sure, continued money printing is and will always be the #1 choice.

We all know that the long-term effect will be hyperinflation, but before that condition kicks in, we might see the markets pushed to unthinkable levels, as inflation first shows up and manifests itself in bond and equity prices.

Today was a start in that direction, but we’ll have to see if these levels hold and can form a base for further advances. Our Domestic Trend Tracking Index (TTI) improved by a substantial percentage (section 3), but it will take another leg higher until a new “Buy” is generated.

Read More

ETFs On The Cutline – Updated Through 05/15/2020

Ulli ETFs on the Cutline Contact

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 73 (last week 75) 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.      

ETF Tracker Newsletter For May 15, 2020

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

A DOWN WEEK ENDS IN THE GREEN

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Another rollercoaster day, which had equities tumbling into the red after the opening bell but, as if by magic, an afternoon ramp pushed major indexes back to a green close. Nevertheless, we saw their worst weekly drop in two months.

However, the bounce-back was not nearly enough to make up for losses sustained early in the week. As a result, the S&P 500 surrendered -2.25% with added volatility due to option expiration making its mark during today’s back-and-forth action.

Horrific economic data points continue to pile up. Here are some of today’s headlines:

  • US Retail Sales Crash By Most Ever In April, Cars & Clothing Clobbered
  • Job Openings Plunge Most On Record Amid Mass Layoffs, Plunge In Hiring
  • US Industrial Production Plunges By Most In Over 100 Years

If you thought that this would have had a negative effect on market direction, you’d be wrong. It seems that the high-speed headline scanning computer algos are programmed to deal with negative news items like this in a simple way: Just ignore them.

In the end, the focus remains on the slow reopening of the country with the hope that the gradual lifting of restrictions will give an assist to a potential bottoming of the economy. The question in my mind is: Will it happen fast enough before further damage is done?

If not, even the computer algos will eventually have to realize that the bottom made in March could be in danger of being taken out.

Read More