ETF Tracker Newsletter For January 17, 2020

ETF Tracker StatSheet          

You can view the latest version here.

CLOSING A SOLID WEEK WITH A STRONG FINISH

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The 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.

While 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.

Wall 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.

Sure, 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.

We’re 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 circumstances.

Right 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.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 01/16/2020

ETF Data 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 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 +9.49% after having generated a new Domestic “Buy” signal effective 2/13/19 as posted.

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Surfing On A Wave Of Optimism

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

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 squeeze.

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, as this 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.

Right now, we are enjoying the ride.

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No Market Commentary

Due to a variety of business commitments, I will not be able to write today’s commentary.

Regular posting will resume tomorrow.

Ulli…

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Losing Support And Slipping Into The Red

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

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.

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Touching New Records

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The bullish mood continued with the S&P and Nasdaq setting new records, while the Dow briefly crossed its 29k marker but backed off later in the session.

Supporting the ramp higher was news that the U.S. no longer plans on designating China a currency manipulator, which is mainly a symbolic designation but was also seen as a good will gesture.

That further seems to soothe the always raw nerves in the US-China trade battle, which are scheduled to be signed this Wednesday, although it will only be a Phase-1 settlement with other negotiations to follow with the goal to eventually achieve a full resolution.

With the earnings season on deck, rumors circulated that, once world’s largest investment banks show their report cards, some of the details (fixed income) may not be as bad as feared, which lent support to today’s advance.

Taking top billing today was the Nasdaq with a +1.04% gain, while the S&P settled for 2nd place with a nice showing of +0.7%, a good chunk of which came during the last hour push, as we have witnessed many times in the past.

All eyes are now on tomorrow’s start of the financial earnings reporting cycle, which may very well give a hint as to what else is to come.

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