Macro Market · Newsletter

Daily Commentary – More Safe Haven Selling Ahead of NFP

Indeed, 4 days into the quarter and it’s been nothing but red for the safe haven trio of Treasuries (TLT), Gold (GLD) and Yen (FXY). Strong US economic data has been one of the main catalysts, and today’s initial jobless claims release continued the recent streak of better than expected data. Now all eyes on the most important release out of all, namely the non-farm payroll (NFP) at 8:30am on Friday. A grand slam jobs number would most likely lead to further pressure as investors rush for the exits.

Looking at the technicals, starting with gold, after breaching the 200WMA there is room to fall to the 50WMA and bottom of bullish up channel which is about $25 away. That will be a great entry point for an oversold bounce.

20161007-GLD.png

The 30Yr Treasury Yield, like the Yen futures chart, is on the verge of breaking weekly downtrend. History suggests we move back above 50WMA, similar to projection from the chart on the TLT we showed previously.

20161007-TYX.png

US stock indices recovered from early morning weakness to close nearly flat on the day, and again remain stuck inside triangle wedge. The fateful day of breakout may come sooner or later, as NFP Friday looms. Last time SPX broke out of a descending trendline to fresh highs also occurred on a NFP Friday, July 8th this year.

20161006-SPX.png

 

So all eyes once again on the NFP number, but arguably this carries much more weight because it is one month before the election and two months before the Fed’s rate hike decision. With recent string of economic data surprising to the upside, the market may seemingly be trying to price in a perfect number. The consensus is rather low at 168k, setting the stage for possibility of a blowout number. But even if so, a case could be made that it’s already “priced in” unless it is the magnitude of 300k. The strategy is to go long utilities and REITs in the short-term on a “buy the news” reaction. REITs already showed signs of strength today by rejecting strong channel support and closing with a bullish doji candle:

20161007-IYR.png

Meanwhile, an obscene event happened in the FX market, specifically the flash crash of Pound. GBP/USD crashed 800pips before recovering some of the losses. This brings back memories of the Swiss Franc when the central bank lifted the currency peg. However this time, there were no news and everyone is still scratching their heads why. Some say it was “A “fat finger” error by a trader or computerised chain reaction was thought responsible as the pound plunged to a new three-decade low during “insane” early trading in Asia on Friday – adding to the huge losses sterling had already suffered amid speculation that Britain is heading for a “hard Brexit”.”

https://www.theguardian.com/business/2016/oct/07/confusion-as-pound-falls-10-in-insane-asian-trading-and-no-one-knows-why

Daily Market Snapshot

Sector ETFs by Daily Return %

SYMBOL NAME CLOSE DAILY (%) MTD % YTD %
XLB Materials Select Sector SPDR 47.75  

0.39

0.82%

0% 9.97%
SMH HOLDRS Merrill Lynch Semiconductor 69.57  

0.4

0.58%

0.14% 30.57%
XLK SPDR Select Sector Fund – Technology 47.75  

0.11

0.23%

-0.06% 11.49%
XLP SPDR Select Sector Fund – Consumer Staples 52.47  

0.1

0.19%

-1.39% 3.92%
IYR iShares Dow Jones U.S. Real Estate Index Fund 76.66  

0.13

0.17%

-4.94% 2.10%
XLE SPDR Select Sector Fund – Energy Select Sector 71.02  

0.11

0.15%

0.58% 17.74%
XLF SPDR Select Sector Fund – Financial 19.63  

0.03

0.15%

1.71% 2.99%
XLY SPDR Select Sector Fund – Consumer Discretionary 80.1  

0.06

0.07%

0.07% 2.48%
SPY SPDR S&P 500 215.78  

0.15

0.07%

-0.24% 5.84%
XLFS S&P SmallCap Financials Portfolio 30.93  

0.02

0.06%

1.58% 0.16%
XLG Rydex Russell Top 50 ETF 152.57  

0.04

0.03%

-0.13% 5.53%
XLI SPDR Select Sector Fund – Industrial 58.31  

0

0%

-0.12% 10%
XLU SPDR Select Sector Fund – Utilities 47.18  

-0.01

-0.02%

-3.69% 9.01%
PFF iShares S&P US Preferred Stock Fund 39.19  

-0.01

-0.03%

-0.78% 0.88%
QQQ PowerShares QQQ Trust 118.73  

-0.06

-0.05%

0.01% 6.14%
DIA Dow Jones Industrial Average ETF 182.52  

-0.14

-0.08%

-0.14% 4.96%
IWM iShares Russell 2000 123.82  

-0.13

-0.10%

-0.31% 9.94%
KRE SPDR KBW Regional Banking ETF 43.21  

-0.07

-0.16%

2.22% 3.08%
XRT SPDR S&P Retail ETF 43.88  

-0.11

-0.25%

0.76% 1.48%
XLV SPDR Select Sector Fund – Health Care 71.92  

-0.27

-0.37%

-0.26% -0.15%
IBB iShares Nasdaq Biotechnology 284.16  

-6.64

-2.31%

-1.83% -16.01%

 

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) MTD % YTD %
USO United States Oil Fund 11.51  

0.16

1.40%

5.31% 4.64%
HYG iShares iBoxx $ HY Corp Bond Fund 86.95  

0.05

0.06%

-0.36% 7.91%
LQD iBoxx $ Investment Grade Corporate Bond Fund 121.82  

0.01

0.01%

-1.10% 6.85%
AGG iShares Barclays Aggregate Bond Fund 111.56  

0

0%

-0.76% 3.29%
TLT iShares Barclays 20 Year Treasury Bond Fund 133.83  

-0.75

-0.56%

-2.50% 10.99%
DBA PowerShares DB Agriculture Fund 20.04  

-0.13

-0.65%

0.30% -2.77%
GLD SPDR Gold Trust 119.66  

-1.12

-0.93%

-4.76% 17.94%
SLV iShares Silver Trust 16.44  

-0.41

-2.46%

-9.67% 24.64%
GDX Market Vectors TR Gold Miners 22.84  

-0.74

-3.19%

-13.58% 66.47%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) MTD % YTD %
EWZ iShares MSCI Brazil Index Fund 35.14  

0.22

0.63%

4.18% 69.92%
EWY iShares MSCI South Korea Index Fund 57.96  

0.3

0.52%

-0.29% 16.69%
FXI iShares FTSE/Xinhua China 25 Index Fund 38.8  

0.14

0.36%

2.08% 9.95%
EWD iShares MSCI Sweden Index Fund 29.34  

0.05

0.17%

0.93% 0.55%
EWT iShares MSCI Taiwan Index Fund 15.75  

0.02

0.13%

0.32% 23.34%
EEM iShares MSCI Emerging Index Fund 37.86  

0.03

0.08%

1.09% 17.61%
EWA iShares MSCI Australia Index Fund 20.91  

0.01

0.05%

0.05% 10.28%
EWM iShares MSCI Malaysia Index Fund 8.1  

0

0%

-0.12% 4.65%
DXJ WisdomTree Japan Total Dividend Fund 44.01  

-0.02

-0.05%

2.56% -12.12%
EWH iShares MSCI Hong Kong Index Fund 22.14  

-0.03

-0.14%

0.59% 11.71%
EWX SPDR S&P Emerging Markets Small Cap ETF 43.7  

-0.06

-0.14%

1.25% 15.88%
EWI iShares MSCI Italy Index Fund 11.02  

-0.02

-0.18%

0% -19.80%
EWS iShares MSCI Singapore Index Fund 10.84  

-0.03

-0.28%

-0.18% 5.45%
EWN iShares MSCI Netherlands Index Fund 25.16  

-0.07

-0.28%

0.40% 5.54%
EWC iShares MSCI Canada Index Fund 25.35  

-0.1

-0.39%

-1.32% 17.91%
EWQ iShares MSCI France Index Fund 24.16  

-0.11

-0.45%

0% -0.21%
EWG iShares MSCI Germany Index Fund 26.27  

-0.12

-0.46%

0% 0.31%
EWJ iShares MSCI Japan Index Fund 12.45  

-0.06

-0.48%

-0.72% 2.72%
EWP iShares MSCI Spain Index Fund 26.74  

-0.14

-0.52%

-0.30% -5.41%
EWO iShares MSCI Austria Index Fund 16.29  

-0.09

-0.55%

-0.18% 4.09%
EWK iShares MSCI Belgium Index Fund 18.68  

-0.14

-0.75%

-0.95% 3.43%
EWW iShares MSCI Mexico Index Fund 49.54  

-0.39

-0.78%

2.19% -0.58%
EWL iShares MSCI Switzerland Index Fund 30.33  

-0.24

-0.79%

-0.72% -2.29%
EWU iShares MSCI United Kingdom Index Fund 15.73  

-0.16

-1.01%

-0.69% -2.54%

 

 

Days Ahead – Events and Economic Data

10/7 Friday

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

 

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