ETF Data updated through Wednesday, November 27, 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.

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 +6.87% after having generated a new Domestic “Buy” signal effective 2/13/19 as posted.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The markets continued to edge higher with the Dow and Nasdaq lagging early on but picking up steam mid-session to join the S&P 500 in green territory. Along the path, more records highs were set with positive economic data providing the necessary ammunition for the gains, which accelerated into the close.

There was little new information about the ongoing US-China trade war, so econ data had to carry the weight for this drive higher. We learned that Q3 GDP was unexpectedly revised up from 1.9% to 2.1% thanks in part to the Fed’s rate cutting efforts. At the same time, inflation remained subdued.

Home sales provide a mixed picture with new home sales being upwardly revised while pending home sales were showing a disappointing -1.78% MoM drop in October.

It’s I important to realize that over the past few weeks, since the dip in early October, markets have gone vertical with not even a 0.5% pullback in the S&P in 35 days. Obviously, the power to blast off like this came in the form of revving up the Fed’s printing presses (called ‘Not QE’) and Trump’s relentless tweets and comments of an imminent trade deal, which at this point does not look like it’s on the horizon. When reviewing the big picture, there are plenty of concerns that could have easily pulled down markets by 2-3%. But that did not happen—yet.

Which is why some analysts calling this extreme bullish optimism a “blow-off top.” This is especially concerning when considering that fundamentals are in total disconnect with stock market levels. Ed Yardeni’s indicator makes it all too obvious as to what could happen next.

The markets will be closed on Thanksgiving and are only open for short session on Friday. I won’t write a weekending report but will post the StatSheet later today.

I will resume regular posting on Monday. In the meantime, I wish you a relaxing and enjoyable Thanksgiving weekend.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The major indexes managed to bounce back from early weakness and hovered safely above their respective unchanged lines bouncing in and out of record territory.

The fact that trade news said absolutely nothing new but mainly regurgitated the same old stuff as “we reached consensus on properly resolving relevant issues,” while the parties agreed to “stay in contact on the remaining points for a phase 1 trade deal.”

In other words, it’s amazing to me that the computer algos are still responding to the “artificial trade deal optimism,” which by now gets almost tiring to report on. One analyst wondered if this was just “a charade to keep stocks high, Trump happy, and China free to intervene in HK without angering the US president?”

Peak Prosperity’s Adam Taggert put it this way:

• Fool us once, shame on you.
• Fool us twice, shame on us.
• Fool us daily for a year… what the hell is wrong with us???

Then Fed head Powell threw in some positives during remarks last night outlining an optimistic view of the US economy. He also signaled that low inflation would keep interest rates low and that home prices have been spurred by that policy.

In the end, for us trend trackers, the reason for the ramping of the markets is secondary, because we will stay on board for as long as we can. Once our directional indictors, or the trailing sell stops, give the signal to step aside, we will head for the safety of the sidelines.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The markets took another jump higher powered by some mega mergers and the good old stand-by, namely the trade talks. All last week’s concerns vanished over the weekend on China’s decision to issue guidelines and raise penalties for intellectual property theft.

This was immediately interpreted as a step in the right direction boosting the chances of a trade deal between the U.S. and China. Never mind that Reuters reported that a “phase 2” of the deal may not happen any time soon, if ever.

This was offset by a tweet by the Chinese mouthpiece, the Global Times, which said that the warring parties might be “very close” to reaching a “phase 1 deal,” according to the infamous and unknown experts close to the Chinese government.

This got the rally started, and the major indexes never looked back with all three of them setting new intraday highs and/or surpassing previous records. As we’ve seen many time before, giving a huge assist was the biggest short squeeze we’ve seen since October which sent SmallCaps sharply higher.

Surprisingly, and may be due to continued issues in the overnight lending market (repos), global liquidity started to reverse, just like it did in April. That brings up the question as to whether equities will follow. After all, as I have posted numerous times, the big driver of stocks is liquidity. If that continues in the direction this chart from Bloomberg indicates, we could see equity weakness ahead.

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 276 (last week 281) 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 StatSheet          

You can view the latest version here.

CLOSING A MEDIOCRE WEEK ON AN UPSWING

[Chart courtesy of MarketWatch.com]

1. Moving the markets

At least for the S&P 500 and Nasdaq, today’s session was another one of the see-saw variety, while the Dow managed to hover on the plus side the entire day.

An early pop followed by a drop set the early tone with Trump issuing what some traders considered a “buy” signal by merely repeating the good old standby phrase, namely that “a deal with China is close.”

This was followed a threat when he “warned XI not to send soldiers to Hong Kong.” But he made good on any fallout from his remark by pronouncing the he “declines to say if he’ll sign Hon Kong bill.”

ZH charted these market moving effects, which simply demonstrates that the computer algos reacted exactly as expected.

Of course, the ongoing trade soap opera would not be complete without China’s Xi joining the fray and chiming in with things like “Beijing wants to work for a trade deal with the U.S. but is not afraid to ‘fight back,’” and that he holds a “positive attitude” towards the talks, but that a deal requires “mutual respect and equality.”

So, the jawboning goes on without any concrete progress being made. Surprisingly, the markets reacted positive with the indexes scoring a green close for the first time in four trading days. However, the setback for the week was minor -0.32% for the S&P 500—hardly a correction worth mentioning.

However, ZH pointed to this chart showing that the real reason or this week’s “pullback” was simply the unexpected contraction of the Fed’s balance sheet (Source: Bloomberg). Hard to argue with the conclusion.

The markets have been very turbulent over the past 2 years and many readers have emailed me to clarify a variety of questions about the ever-changing investment environment. A good way to enhance your understanding is this U-tube video, during which host Greg Hunter goes one on one with author and analysist John Rubino. It’s 30 minutes well spent.