Macro Market · Market Commentary · Newsletter

Daily Commentary – Sea of Red

US equity markets suffered a massive hangover from Columbus Day celebrations, with SPX and Dow crushing through major supports on heaviest volume since beginning of quarter. Yesterday’s decline bears major technical implications, as both flagship indices confirmed a bearish shooting star reversal and in the latter a false breakout from triangle wedge.

20161012-DIA.png

What is also worth noting is that the declines were broad based as every sector was hit. That includes gold and Treasuries which as safe havens typically benefits in case of market turmoil but were both also under pressure. The one sole winner of the day is US Dollar, as the DXY (US Dollar Index) broke to highest level since March this year. The catalyst was said to be hawkish remarks from Chicago Federal Reserve Bank President Charles Evans, who “signaled a rate hike might be around the corner for the U.S. Federal Reserve.”

http://www.investopedia.com/news/us-dollar-hits-10week-high/

Sector-wise, every sector was red but the top performing sector was Consumer Staples (XLP), down only -0.52%. The worst hits were Biotechs (IBB) and Health Care (XLV) which were decimated -3.9% and -2.5% respectively. With Clinton presidency more likely by the day, there are increasing fears that that her policies would pressure biotechs’ profit margin by reining in hefty increase in drug prices.  Technically, both are getting oversold and hitting strong support areas. In the IBB, it held and closed right above 200DMA and also descending trendline.

20161012-IBB.png

Meanwhile,  XLV (Health Care) has had a rough time since making YTD highs in August, marred by a bearish trend ever since and in addition breaking through bullish trendline drawn off YTD lows. Yesterday it plunged through Sept lows but should find solid support at 200DMA as well as gap at 69.5.

20161012-XLV.png

Elsewhere, another major loser was the Semiconductors (SMH) which declined by -2%. The technical picture is worth keep an eye on as we broke back inside an ascending wedge. Should we drop through the steep ascending trendline, beware of a rollercoaster drop back towards previous channel breakout area, which is about -10% from here.

 

20161012-SMH.png

Last but not least, yesterday marked the beginning of earnings season, and it started on a sour note as “Alcoa Reports Worse-Than-Expected Quarter”. Recap from WSJ:

“Aluminum maker Alcoa Inc. cut its forecast for its aerospace-focused division and reported a decline in revenue, sending its shares tumbling and underscoring challenges facing the company as it prepares to split into two firms.

The New York-based manufacturer, which is set to divide on Nov. 1, reported a profit of $166 million, or 33 cents a share, up from $44 million, or 6 cents a share, a year ago on cost cutting. Overall revenue fell 6% to $5.21 billion, and earnings and profit missed analysts’ projections.

Shares fell 11% to $28.08 in afternoon trading on the New York Stock Exchange.”

http://www.wsj.com/articles/with-split-looming-alcoa-reports-worse-than-expected-quarter-1476188165

Aside from more Fedspeak and FOMC minutes, expect earnings’ reports to be driving the direction of the stock market. The bar is set particularly high this reporting season, as earnings had been declining for 5 straight quarters, and estimates expect the decline to finally end this quarter. With stocks on shaky grounds now, we shall see how this plays out.

http://www.cnbc.com/2016/10/10/earnings-season-is-here-but-are-revenue-estimates-too-high.html

 

 

 

 

Daily Market Snapshot

Sector ETFs by Daily Return %

SYMBOL NAME CLOSE DAILY (%) MTD % YTD %
XLP SPDR Select Sector Fund – Consumer Staples 52.06  

-0.27

-0.52%

-2.16% 3.11%
PFF iShares S&P US Preferred Stock Fund 38.93  

-0.3

-0.77%

-1.44% 0.21%
XLF SPDR Select Sector Fund – Financial 19.54  

-0.18

-0.92%

1.24% 2.52%
XLFS S&P SmallCap Financials Portfolio 30.81  

-0.3

-0.97%

1.18% -0.23%
IYR iShares Dow Jones U.S. Real Estate Index Fund 76.23  

-0.77

-1.01%

-5.47% 1.53%
XLI SPDR Select Sector Fund – Industrial 57.02  

-0.6

-1.05%

-2.33% 7.56%
DIA Dow Jones Industrial Average ETF 181.2  

-1.92

-1.05%

-0.86% 4.20%
XLK SPDR Select Sector Fund – Technology 47.41  

-0.54

-1.13%

-0.77% 10.69%
XLU SPDR Select Sector Fund – Utilities 46.97  

-0.54

-1.14%

-4.12% 8.53%
XLE SPDR Select Sector Fund – Energy Select Sector 70.9  

-0.82

-1.15%

0.41% 17.54%
XLG Rydex Russell Top 50 ETF 151.44  

-1.76

-1.16%

-0.87% 4.74%
XLY SPDR Select Sector Fund – Consumer Discretionary 78.9  

-0.97

-1.22%

-1.42% 0.95%
SPY SPDR S&P 500 213.43  

-2.73

-1.27%

-1.33% 4.69%
KRE SPDR KBW Regional Banking ETF 42.9  

-0.57

-1.32%

1.49% 2.34%
XLB Materials Select Sector SPDR 46.5  

-0.64

-1.37%

-2.62% 7.09%
QQQ PowerShares QQQ Trust 117.52  

-1.7

-1.44%

-1.01% 5.06%
XRT SPDR S&P Retail ETF 43.35  

-0.67

-1.53%

-0.46% 0.25%
IWM iShares Russell 2000 122.03  

-2.27

-1.84%

-1.76% 8.36%
SMH HOLDRS Merrill Lynch Semiconductor 67.97  

-1.43

-2.08%

-2.16% 27.57%
XLV SPDR Select Sector Fund – Health Care 70.39  

-1.81

-2.54%

-2.39% -2.28%
IBB iShares Nasdaq Biotechnology 277  

-11.07

-3.92%

-4.30% -18.13%

 

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) MTD % YTD %
DBA PowerShares DB Agriculture Fund 20.02  

0.02

0.10%

0.20% -2.86%
AGG iShares Barclays Aggregate Bond Fund 111.36  

-0.17

-0.15%

-0.94% 3.10%
TLT iShares Barclays 20 Year Treasury Bond Fund 132.83  

-0.3

-0.23%

-3.23% 10.16%
LQD iBoxx $ Investment Grade Corporate Bond Fund 121.73  

-0.38

-0.31%

-1.18% 6.77%
GLD SPDR Gold Trust 119.55  

-0.61

-0.51%

-4.85% 17.83%
HYG iShares iBoxx $ HY Corp Bond Fund 86.91  

-0.49

-0.56%

-0.40% 7.86%
USO United States Oil Fund 11.58  

-0.09

-0.77%

5.95% 5.27%
SLV iShares Silver Trust 16.56  

-0.17

-1.02%

-9.01% 25.55%
GDX Market Vectors TR Gold Miners 22.58  

-0.58

-2.54%

-14.57% 64.58%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) MTD % YTD %
EWW iShares MSCI Mexico Index Fund 50.63  

-0.29

-0.57%

4.43% 1.61%
EWO iShares MSCI Austria Index Fund 16.12  

-0.12

-0.74%

-1.23% 3%
EWC iShares MSCI Canada Index Fund 25.22  

-0.19

-0.75%

-1.83% 17.30%
EWP iShares MSCI Spain Index Fund 26.2  

-0.21

-0.80%

-2.31% -7.32%
EWZ iShares MSCI Brazil Index Fund 35.58  

-0.29

-0.81%

5.48% 72.05%
EWK iShares MSCI Belgium Index Fund 18.49  

-0.16

-0.86%

-1.96% 2.38%
EWJ iShares MSCI Japan Index Fund 12.38  

-0.11

-0.88%

-1.28% 2.15%
EWL iShares MSCI Switzerland Index Fund 29.9  

-0.28

-0.93%

-2.13% -3.67%
EWG iShares MSCI Germany Index Fund 25.97  

-0.28

-1.07%

-1.14% -0.84%
DXJ WisdomTree Japan Total Dividend Fund 43.7  

-0.49

-1.12%

1.84% -12.74%
EWQ iShares MSCI France Index Fund 23.81  

-0.33

-1.38%

-1.45% -1.65%
EWN iShares MSCI Netherlands Index Fund 24.53  

-0.37

-1.50%

-2.11% 2.89%
EWI iShares MSCI Italy Index Fund 10.89  

-0.18

-1.64%

-1.18% -20.74%
EWM iShares MSCI Malaysia Index Fund 8  

-0.14

-1.73%

-1.36% 3.36%
EWS iShares MSCI Singapore Index Fund 10.52  

-0.2

-1.88%

-3.13% 2.33%
EWA iShares MSCI Australia Index Fund 20.59  

-0.4

-1.92%

-1.48% 8.60%
EWX SPDR S&P Emerging Markets Small Cap ETF 42.89  

-0.88

-2.03%

-0.63% 13.74%
EWT iShares MSCI Taiwan Index Fund 15.56  

-0.33

-2.10%

-0.89% 21.85%
EWU iShares MSCI United Kingdom Index Fund 15.2  

-0.33

-2.15%

-4.04% -5.82%
EEM iShares MSCI Emerging Index Fund 37.22  

-0.88

-2.34%

-0.61% 15.63%
EWD iShares MSCI Sweden Index Fund 28.57  

-0.73

-2.52%

-1.72% -2.09%
EWH iShares MSCI Hong Kong Index Fund 21.6  

-0.65

-2.96%

-1.86% 8.98%
FXI iShares FTSE/Xinhua China 25 Index Fund 37.88  

-1.16

-3.02%

-0.34% 7.34%
EWY iShares MSCI South Korea Index Fund 56.03  

-2.17

-3.80%

-3.61% 12.80%

 

 

 

 

 

Week Ahead – Events and Economic Data

10/12 Wednesday

Time Event / Data
8:00am FOMC Member Dudley Speaks
9:40am FOMC Member George Speaks
10:00am JOLTs Job Openings
2:00pm FOMC Meeting Minutes

 

10/13 Thursday

Time Event / Data
8:30am Initial Jobless Claims
12:15pm FOMC Member Harker Speaks

 

10/14 Friday

Time Event / Data
8:30am PPI, Retail Sales
10:00am Michigan Consumer Expectation
1:30pm Fed Chair Yellen Speaks

 

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