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Daily Newsletter – Getting Warmed Up

US markets had a relatively quiet day to start what could arguably be dubbed the most important quarter of the decade. SPX was down a slight 0.3% at 2161, finishing off lows from 2154.  In terms of events, domestically we had the Manufacturing ISM which was better at 51.5 vs. 50.3 expected. The main headline was across the Atlantic Ocean in London, where PM Theresa May announced over the weekend that Article 50 will be triggered by March next year. As a result, pound renewed its plunge as GBP/USD plummeted to 31 year fresh lows as we speak.

20161004-GBPUSDDaily.png

That said, the correlation between Pound or Brexit vs world stock markets has unofficially dropped to zero. Or inversely correlated to UK stock market where the “FTSE 100 smashes 7000 and touch fresh 16-month high.” as exporters celebrate weaker pound.

 

http://www.telegraph.co.uk/business/2016/10/04/pound-dives-to-31-year-low-and-ftse-100-smashes-7000-as-brexit-w/

 

It’s now largely accepted Brexit is a localized event, and so it will only be noise to the rest of the world. Meanwhile, back to the US markets, things are just getting warmed up. Technically, SPX and Dow are in a tightening wedge which ultimately will break one way or another, and improving technicals are leaning towards a break upward.

20161004-DIA.png

On the heels of stronger than expected economic data, interest rates turned higher with TLT down -0.3%. But rate-sensitive sectors were hit much harder with IYR and XLU resuming their recent selling pressure, down -1.8% and -1.4% respectively. It appears fund sector rotation is positioning for higher rates in the future which would explain the high volume selling.

20161004-XLU.png

Safe-haven selling was another theme yesterday, with Gold and Yen both down and threatening to break their respectively wedges.

20161004-GOLD.png

The USD/JPY has been in a vicious downtrend since earlier the year which caught many offguard, as the unlimited printing by BoJ failed to dampen the appreciation of its currency. But the tide may be turning finally as it looks to pierce through this line in the sand. More strong data out of US will certainly serve as tailwind as well.

20161004-USDJPYDaily.png

 

 

 

 

Daily Market Snapshot

Sector ETFs by Daily Return %

SYMBOL NAME CLOSE WTD % MTD % YTD %
IBB iShares Nasdaq Biotechnology 290 0.19% 0.19% -14.28%
XLI SPDR Select Sector Fund – Industrial 58.43 0.09% 0.09% 10.22%
XLY SPDR Select Sector Fund – Consumer Discretionary 79.99 -0.06% -0.06% 2.34%
XLE SPDR Select Sector Fund – Energy Select Sector 70.56 -0.07% -0.07% 16.98%
XLV SPDR Select Sector Fund – Health Care 72.05 -0.08% -0.08% 0.03%
XLB Materials Select Sector SPDR 47.69 -0.13% -0.13% 9.83%
QQQ PowerShares QQQ Trust 118.55 -0.14% -0.14% 5.98%
SPY SPDR S&P 500 215.78 -0.24% -0.24% 5.84%
DIA Dow Jones Industrial Average ETF 182.32 -0.25% -0.25% 4.84%
XRT SPDR S&P Retail ETF 43.43 -0.28% -0.28% 0.44%
XLG Rydex Russell Top 50 ETF 152.33 -0.29% -0.29% 5.36%
XLK SPDR Select Sector Fund – Technology 47.64 -0.29% -0.29% 11.23%
IWM iShares Russell 2000 123.82 -0.31% -0.31% 9.94%
XLFS S&P SmallCap Financials Portfolio 30.33 -0.39% -0.39% -1.78%
PFF iShares S&P US Preferred Stock Fund 39.33 -0.43% -0.43% 1.24%
XLF SPDR Select Sector Fund – Financial 19.21 -0.47% -0.47% 0.79%
XLP SPDR Select Sector Fund – Consumer Staples 52.87 -0.64% -0.64% 4.71%
SMH HOLDRS Merrill Lynch Semiconductor 68.93 -0.78% -0.78% 29.37%
KRE SPDR KBW Regional Banking ETF 41.86 -0.97% -0.97% -0.14%
XLU SPDR Select Sector Fund – Utilities 48.3 -1.41% -1.41% 11.60%
IYR iShares Dow Jones U.S. Real Estate Index Fund 79.18 -1.81% -1.81% 5.46%

 

Commodity & Bond ETFs

SYMBOL NAME CLOSE WTD % MTD % YTD %
USO United States Oil Fund 11.1 1.56% 1.56% 0.91%
DBA PowerShares DB Agriculture Fund 20 0.10% 0.10% -2.96%
GLD SPDR Gold Trust 125.32 -0.25% -0.25% 23.52%
AGG iShares Barclays Aggregate Bond Fund 112.09 -0.29% -0.29% 3.78%
TLT iShares Barclays 20 Year Treasury Bond Fund 136.81 -0.33% -0.33% 13.46%
HYG iShares iBoxx $ HY Corp Bond Fund 86.82 -0.50% -0.50% 7.74%
LQD iBoxx $ Investment Grade Corporate Bond Fund 122.51 -0.54% -0.54% 7.46%
GDX Market Vectors TR Gold Miners 25.96 -1.78% -1.78% 89.21%
SLV iShares Silver Trust 17.87 -1.81% -1.81% 35.48%

 


 

Country ETFs

SYMBOL NAME CLOSE WTD % MTD % YTD %
EWZ iShares MSCI Brazil Index Fund 34.66 2.76% 2.76% 67.60%
EWW iShares MSCI Mexico Index Fund 49.16 1.40% 1.40% -1.34%
EWX SPDR S&P Emerging Markets Small Cap ETF 43.5 0.79% 0.79% 15.35%
EEM iShares MSCI Emerging Index Fund 37.71 0.69% 0.69% 17.15%
EWM iShares MSCI Malaysia Index Fund 8.15 0.49% 0.49% 5.30%
EWD iShares MSCI Sweden Index Fund 29.19 0.41% 0.41% 0.03%
EWA iShares MSCI Australia Index Fund 20.94 0.19% 0.19% 10.44%
EWH iShares MSCI Hong Kong Index Fund 22.05 0.18% 0.18% 11.25%
FXI iShares FTSE/Xinhua China 25 Index Fund 38.05 0.11% 0.11% 7.82%
EWT iShares MSCI Taiwan Index Fund 15.7 0% 0% 22.94%
EWU iShares MSCI United Kingdom Index Fund 15.83 -0.06% -0.06% -1.92%
EWO iShares MSCI Austria Index Fund 16.3 -0.12% -0.12% 4.15%
EWY iShares MSCI South Korea Index Fund 58.04 -0.15% -0.15% 16.85%
EWN iShares MSCI Netherlands Index Fund 25.02 -0.16% -0.16% 4.95%
EWC iShares MSCI Canada Index Fund 25.64 -0.19% -0.19% 19.26%
EWL iShares MSCI Switzerland Index Fund 30.48 -0.23% -0.23% -1.80%
DXJ WisdomTree Japan Total Dividend Fund 42.79 -0.28% -0.28% -14.56%
EWQ iShares MSCI France Index Fund 24.09 -0.29% -0.29% -0.50%
EWJ iShares MSCI Japan Index Fund 12.5 -0.32% -0.32% 3.14%
EWG iShares MSCI Germany Index Fund 26.16 -0.42% -0.42% -0.11%
EWP iShares MSCI Spain Index Fund 26.7 -0.45% -0.45% -5.55%
EWS iShares MSCI Singapore Index Fund 10.81 -0.46% -0.46% 5.16%
EWK iShares MSCI Belgium Index Fund 18.75 -0.58% -0.58% 3.82%
EWI iShares MSCI Italy Index Fund 10.94 -0.73% -0.73% -20.38%

 

Days Ahead – Events and Economic Data

10/2 Tuesday

Time Event / Data
8:05am FOMC Member Lacker Speaks
7:40pm Chicago Fed President Evan Speaks

10/5 Wednesday

Time Event / Data
8:15am ADP Nonfarm Employment Change
10am ISM Non Manufacturing
10:30am Crude Oil Inventories

10/6 Thursday

Time Event / Data
8:30am Initial Jobless Claims

10/7 Friday

Time Event / Data
8:30am Nonfarm Payroll (NFP)

 

 

Quantitative Strategy – Automated Portfolio Update

Performance

ASSET CLASS TYPE LONG or SHORT DAILY % MTD % QTD % YTD%
Equities Short-Term Long Only
-0.76% -0.76% -0.76% 45.54%
Short Only
  1.04% 1.04% 1.04% 35.36%
Long/Short
  0% 0% 0% 41.69%
Medium-Term Long Only
  -0.51% -0.51% -0.51% 20.23%
ETF Short-Term Long Only
  0% 0% 0% 30.97%
Short Only
  0.89% 0.89% 0.89% 7.69%
Long/Short
  0.89% 0.89% 0.89% 29.37%
Medium-Term Long Only
  -0.53% -0.53% -0.53% 25.01%
Futures Short-Term Long/Short
  0.13% 0.13% 0.13% 6.68%
FX Short-Term Long/Short
  0% 0% 0% 15.11%
SPX Benchmark Index
-0.33% -0.33% -0.33% 5.74%
 

Portfolio Commentary

Our portfolios are generically down on the day along with broader markets. We closed our long-term position OKE, one of our favorite names which we were long since April this year with a 43% profit. Energy sector has served us well this year as we capitalized on its recovery, and while we are still long a few energy stocks, we are actively looking to identify and rotate into the next best performing sector. Our quantitative strategies detected select names in the Tech sector over past month such as TWTR and GPRO which are recovering off multi-year bottoms. WDC and STX are two other breakout names off recent lows which we have had success so far.

 

 

Chart in Focus

KMX  –  Medium-Term Long

Target: 55.25

Entry Point(s): 52.52, 51.92

Comments: Formed bullish hammer candle after holding 200DMA twice. A relief rally would bounce back towards broken swing point of 55 area

 20161004-KMX.png

 


 

QCOM – Short-Term Short

Target: 63.5

Entry Point(s): 67.11

Comments: Confirmed shooting star reversal points to a pullback towards breakout and 20DMA near 63.5 area.

20161004-QCOM.png

 


 

FXY – Medium-Term Short

Target: 91

Entry Point(s): 95, and on confirmation of break, short of any rallies

Comments: Yearlong bull trend looks set to end on a confirmed weekly close below 95.

20161004-FXY.png

 

Day Trading Charts & Parameters

Futures

 

Dow 30

Support: 18050

Resistance:18218, 18405

20161004-YM.png

S&P 500

Support: 2148, 2127

Resistance: 2163, 2174

20161004-ES.png

 

NDX 100

Support: 4820

Resistance: 4888

20161004-NDX.png

Crude Oil

Support: 45.6

Resistance: 49

20161004-CL.png

Gold

Support: 1305, 1260

Resistance: 1342

20161004-gl

10-Yr Treasury Note

Support: 130.86, 130

Resistance: 131.86

20161004-TY.png


 

US Dollar Index

Support: 95.26   , 96

Resistance: 96.8

20161004-DX.png

Nikkei 225

Support: 16625, 16360

Resistance: 16900

20161004-NIKK.png

 

 

 

Currency Pairs

USD/JPY

Support: 102.1, 101.58

Resistance: 103.13, 104

20161004-USDJPY.png

EUR/USD

Support: 1.1172, 1.10

Resistance: 1.1246

20161004-EURUSD.png

 

GBP/USD

Support: none near term

Resistance: 1.2837

20161004-GBPUSD.png

 

AUD/USD

Support: 0.7640, 0.7600

Resistance: 0.7695

 

20161004-AUDUSD.png

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