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Daily Commentary – Stocks Dodged a Bullet

On the heels of a weak trade data from China, premarket US stock markets were nervous with S&P, Nasdaq and Dow futures gapping down to crucial support area with confluence. But dip buyers showed up, pushing the markets up to close with minimal damage. The ST charts suggest a further bounce is due, though plenty of resistance ahead starting with each index’s broken bullish trendline.

20161014-dia20161014-qqq

Treasuries followed through on previous day’s bullish hammer candle higher, though off session highs on improved risk appetite. ST technicals are turning positive after holding Sept lows and more near-term upside can be expected towards 20DMA in TLT. Utilities (XLU) and REITs (IYR) once again were the beneficiary, with the former particularly strong, up 1.2% on the day with strong volume. Still plenty to prove in the technical picture to turn bullish in the longer timeframe, as it has yet to close solidly above 200DMA as well as break through descending channel

20161014-xlu

The weaklings was the regional banks (KRE) and semiconductors (SMH), down -2.5% and -1.1% respectively. We have focused on the latter before, as it had been on a steep ascending wedge but finally broken this week. Yesterday, intraday SMH crumbled to as low as 66.06 under the 50DMA but was able to reject lows and closed with a bullish hammer doji candle.

20161014-smh

A tradeable bounce can be expected, among many other sectors which also printed bullish hammer candles such as the financials (XLF), which was down -1% but similarly well off lows.

20161014-xlf

The 3 major banks will be reporting later today which could be catalytic to a bullish reversal. Here is what to expect per 24/7 Wall St:

“Citigroup Inc. (NYSE: C) has been making a very strong push since the Brexit this summer, with shares up over 25% in that time. Second-quarter results helped with these gains over the summer, even though the bank warned that profits for the quarter could drop by as much as 25% in June. However, results were much better than expected.”

“Will JPMorgan have a repeat performance in the third quarter and pull the market up again? This has yet to be seen. But at a glance, its stock has performed well since the Brexit in terms of its peer group. As for what analysts are saying, the consensus estimates are $1.39 in EPS and revenue of $23.94 billion for this quarter.

Wells Fargo & Co. (NYSE: WFC) has been at the center of controversy in the financial sector after it was revealed that the company was creating unauthorized bank accounts and cross-selling these accounts without actually selling. Things got bad enough that former CEO John Stumpf was forced to step down from his position after facing a barrage of questions and accusations from congressional committees.

Keep in mind that this is the only major bank that has been worse off since the Brexit, which is no easy feat. Even if earnings manage to impress, it’s very possible that the negative sentiment around this stock could cancel out any gains. But on the other hand, one has to ask if this stock has bottomed out. The consensus estimates call for EPS of $1.01 and $23.19 billion in revenue.”

http://247wallst.com/banking-finance/2016/10/13/what-to-expect-from-fridays-major-bank-earnings/

Jumping across the Pacific Ocean, China was the worst hit market with FXI -1.6%, with Taiwan and Hong Kong not far behind, down -1.3% and -1.2% respectively. Technically, FXI has a triple top with multiple negative technical divergences, and hence could very well be the top of 2016 after such a stellar year, as investors may look to lock in gains and avoid further volatility.

20161014-FXI.png

Heading into TGIF, we have much-watched economic data such as PPI and retail sales, as well as remarks from Yellen. also some important weekly closes to watch for, notably crude oil, which rallied yesterday and may still be able to achieve a bullish inverse H&S breakout.

20161014-CLWeekly.png

Daily Market Snapshot

Sector ETFs by Daily Return %

SYMBOL NAME CLOSE DAILY (%) MTD % YTD %
XLU SPDR Select Sector Fund – Utilities 48.02  

0.59

1.24%

-1.98% 10.95%
IYR iShares Dow Jones U.S. Real Estate Index Fund 77.69  

0.43

0.56%

-3.66% 3.48%
IBB iShares Nasdaq Biotechnology 271.11  

0.98

0.36%

-6.34% -19.87%
PFF iShares S&P US Preferred Stock Fund 38.75  

0.04

0.10%

-1.90% -0.26%
XLV SPDR Select Sector Fund – Health Care 70.09  

0.03

0.04%

-2.80% -2.69%
XLP SPDR Select Sector Fund – Consumer Staples 52.36  

0.01

0.02%

-1.60% 3.70%
XLI SPDR Select Sector Fund – Industrial 57.11  

-0.02

-0.04%

-2.18% 7.73%
DIA Dow Jones Industrial Average ETF 180.84  

-0.53

-0.29%

-1.06% 3.99%
SPY SPDR S&P 500 213.01  

-0.7

-0.33%

-1.52% 4.48%
QQQ PowerShares QQQ Trust 117  

-0.42

-0.36%

-1.45% 4.60%
XLY SPDR Select Sector Fund – Consumer Discretionary 78.98  

-0.29

-0.37%

-1.32% 1.05%
XLG Rydex Russell Top 50 ETF 151.04  

-0.63

-0.42%

-1.13% 4.47%
XLB Materials Select Sector SPDR 46.17  

-0.24

-0.52%

-3.31% 6.33%
XLE SPDR Select Sector Fund – Energy Select Sector 70.21  

-0.39

-0.55%

-0.57% 16.40%
XLK SPDR Select Sector Fund – Technology 47.19  

-0.3

-0.63%

-1.23% 10.18%
IWM iShares Russell 2000 120.92  

-1.01

-0.83%

-2.65% 7.37%
XLF SPDR Select Sector Fund – Financial 19.33  

-0.19

-0.98%

0.16% 1.42%
XRT SPDR S&P Retail ETF 43.21  

-0.47

-1.08%

-0.78% -0.07%
XLFS S&P SmallCap Financials Portfolio 30.48  

-0.35

-1.14%

0.10% -1.30%
SMH HOLDRS Merrill Lynch Semiconductor 67.19  

-0.78

-1.15%

-3.28% 26.11%
KRE SPDR KBW Regional Banking ETF 41.79  

-1.04

-2.46%

-1.14% -0.31%

 

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) MTD % YTD %
GDX Market Vectors TR Gold Miners 23.49  

0.42

1.80%

-11.12% 71.21%
DBA PowerShares DB Agriculture Fund 20.08  

0.14

0.70%

0.50% -2.57%
USO United States Oil Fund 11.49  

0.06

0.52%

5.12% 4.45%
TLT iShares Barclays 20 Year Treasury Bond Fund 133.46  

0.5

0.38%

-2.77% 10.68%
LQD iBoxx $ Investment Grade Corporate Bond Fund 122.19  

0.3

0.25%

-0.80% 7.17%
GLD SPDR Gold Trust 120.03  

0.29

0.24%

-4.47% 18.30%
AGG iShares Barclays Aggregate Bond Fund 111.56  

0.16

0.14%

-0.76% 3.29%
SLV iShares Silver Trust 16.61  

-0.04

-0.24%

-8.74% 25.93%
HYG iShares iBoxx $ HY Corp Bond Fund 86.66  

-0.22

-0.25%

-0.69% 7.55%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) MTD % YTD %
EWZ iShares MSCI Brazil Index Fund 35.83  

0.38

1.07%

6.23% 73.26%
EWC iShares MSCI Canada Index Fund 25.38  

0.11

0.43%

-1.21% 18.05%
EWK iShares MSCI Belgium Index Fund 18.45  

0.04

0.22%

-2.17% 2.16%
EWJ iShares MSCI Japan Index Fund 12.34  

-0.02

-0.16%

-1.59% 1.82%
EWM iShares MSCI Malaysia Index Fund 7.98  

-0.02

-0.25%

-1.60% 3.10%
EWS iShares MSCI Singapore Index Fund 10.39  

-0.03

-0.29%

-4.33% 1.07%
EWA iShares MSCI Australia Index Fund 20.67  

-0.06

-0.29%

-1.10% 9.02%
EWX SPDR S&P Emerging Markets Small Cap ETF 42.6  

-0.14

-0.33%

-1.30% 12.97%
EWU iShares MSCI United Kingdom Index Fund 15.15  

-0.05

-0.33%

-4.36% -6.13%
EWQ iShares MSCI France Index Fund 23.65  

-0.08

-0.34%

-2.11% -2.31%
EWD iShares MSCI Sweden Index Fund 28.11  

-0.13

-0.46%

-3.30% -3.67%
EWO iShares MSCI Austria Index Fund 15.99  

-0.08

-0.50%

-2.02% 2.17%
EWL iShares MSCI Switzerland Index Fund 29.63  

-0.15

-0.50%

-3.01% -4.54%
EWG iShares MSCI Germany Index Fund 25.64  

-0.14

-0.54%

-2.40% -2.10%
EWP iShares MSCI Spain Index Fund 26.03  

-0.15

-0.57%

-2.95% -7.92%
EWW iShares MSCI Mexico Index Fund 50.13  

-0.35

-0.70%

3.40% 0.60%
EWI iShares MSCI Italy Index Fund 10.78  

-0.08

-0.74%

-2.18% -21.54%
DXJ WisdomTree Japan Total Dividend Fund 43.54  

-0.37

-0.85%

1.47% -13.06%
EEM iShares MSCI Emerging Index Fund 36.82  

-0.33

-0.89%

-1.68% 14.38%
EWN iShares MSCI Netherlands Index Fund 24.27  

-0.24

-0.98%

-3.15% 1.80%
EWY iShares MSCI South Korea Index Fund 55.54  

-0.55

-0.99%

-4.46% 11.82%
EWH iShares MSCI Hong Kong Index Fund 21.49  

-0.25

-1.16%

-2.36% 8.43%
EWT iShares MSCI Taiwan Index Fund 15.53  

-0.2

-1.28%

-1.08% 21.61%
FXI iShares FTSE/Xinhua China 25 Index Fund 37.23  

-0.6

-1.60%

-2.05% 5.50%

 

 

 

 

 

Days Ahead – Events and Economic Data

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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