It’s been awhile, but the US Dollar Index did something today that it hasn’t done in nearly a year.  As shown in the chart below, today’s rally in the greenback put the index above its 200-DMA for the first time since May 12, 2017.  While the gains of over 3% in the last two weeks have been impressive, the dollar still has a lot of ground to make up before working its way out of the current downtrend.  Will a hawkish Fed on Wednesday help to continue the rally or will a dovish sounding Fed stop the rally in its tracks?

At a length of 252 trading days, the US Dollar Index’s streak of closes below the 200-DMA was the seventh longest in the history of the index dating back to 1971 and the longest since 2011 (257 trading days).  The longest streak occurred back in the mid-1980s and stretched 546 trading days from May 1985 through August 1987.  What was even more impressive about that streak is just two weeks after it ended another streak of 209 days started.

May certainly hasn’t gotten off to the best start in terms of market performance or economic data.  A case in point? Today’s ISM Manufacturing report for the month of April.  While economists were forecasting the headline reading to come in at a level of 58.5, the actual reading came in 1.2 points weaker at 57.3.  That’s the weakest headline reading since last July and the weakest report relative to expectations since last April’s report.  While the report was a disappointment, keep in mind that two months ago, the index was at its highest level since 2004.

The table below breaks down this month’s report by each of the index’s sub-components and shows their m/m and y/y change.  Breadth in this month’s report was skewed to the negative side on a m/m basis, but positive on a y/y basis.  Production saw the largest m/m decline, which also put it into negative territory on a y/y basis as well. On the upside, the biggest gains were in Customer Inventories and Backlog Orders.

Both Production and New Orders declined this month, posting their fourth straight month of declines.  The last time both components were down m/m for at least four straight months was in the period ending May 2011.  Both indices remain at levels indicative of healthy growth, but they have also shown a meaningful downshift from multi-year highs.

Two indices that traded higher this month were Backlog Orders and Prices Paid.  Backlog Orders hit its highest level since May 2004, while Prices Paid hit the highest level since April 2011.  One surefire way to alleviate order backlogs is through higher prices, so that should support continued strength in the Prices Paid component.

Finally, we wanted to take a quick look at the commentary section of this month’s report, and reading through it, the tone of the commentary remains positive, but one theme that runs through it is building upside price pressures.  Whether it’s terms like tightening supply, longer lead times, tariffs, or shortages, one thing these factors typically always lead to is higher prices.

Our Trend Analyzer tool lets users easily monitor trend and timing measures of the stocks and ETFs they follow most closely.  If you visit our Trend Analyzer page, the “US Index” ETF section is available to the public, but the rest of the sections (and the ability to create custom portfolios) are reserved for Bespoke subscribers.

With the month of May now upon us, we wanted to note that every single one of the US Index ETFs that we track are back below their 50-day moving averages.  You can see this in the “trading range” section of the snapshot below.  The dot for each ETF represents where it’s currently trading, while the tail end represents where it was trading one week ago.  Also note that every single US Index ETF is in “neutral” territory, meaning it’s neither overbought nor oversold.

With 2018 already one-third complete, investors sure don’t have much to show for it so far.  Below we have updated our ETF Asset Class Performance Matrix summarizing the returns of ETFs representing various asset classes YTD, in the month of April, as well as the last seven days of the month.  For the purposes of this post, we’ll focus on returns in April.  For the month, the S&P 500 broke a streak of two straight multi-percentage point declines as SPY gained a paltry 0.52%.  That’s hardly enough to put a dent in the 6%+ decline from the prior two months, but you have to start somewhere!  Most other major US index ETFs also saw modest gains in April except for mid caps (IJH), which were down slightly.  We would also point out that April would have been considerably better had it not been for a sell-off in the last week of the month, which erased most of the month’s prior gains.  Hmm. A sell-off that erased early gains.  That’s starting to sound like a familiar pattern isn’t it?

Within US sectors, returns were a lot more spread apart than the modest changes that the major indices saw.  Energy (XLE) was the big winner in April, surging over 9%, while Consumer Staples (XLP) and Industrials (XLI) both fell more than 2.5%.  Industrials were having a good April up until the month’s final week.  The negative reversal in Caterpillar (CAT) after its earnings report and weakness in the defense contractors contributed to a 4.4% decline for XLI in the last week of the month.  In addition to Energy, both Consumer Discretionary (XLY) and Utilities (XLU) saw gains of more than 2% in April.

Like individual sectors, international indices also saw widely varied returns in April.  While Russia (RSX) and Brazil (EWZ) both fell more than 5%, France (EWQ), Italy (EWI) and the UK (EWU) were all up over 4%.  Keep in mind, too, when looking at these results that they are in dollar-adjusted terms.  Therefore, in local currency terms, these indices were up even more.  Take France for example.  While EWQ was up 4.1% in dollar terms, in local currency, it rallied 5.7%.

In the commodity space, oil rallied 5.4% in April, which propelled the overall commodities ETF (DBC) higher by 3.42%.  Gold (GLD) and silver (SLV) were both down marginally.

Finally, Treasury ETFs all fell in April, which means Treasury yields were higher across the board.