Macro Market · Market Commentary · Newsletter

Weekly Commentary – Setting the Big Stage

It was a week no short of action (perhaps except in Gold), and we are setting the stage for more significant directional moves ahead of us into November and the Election. Starting with the US equity markets, the DIA chart is very telling. Recall we had a false breakout in triangle wedge in the Dow which turned fateful as it led to the breakdown of LT bullish trendline off YTD lows.

20161015-dia

On Friday, US equity markets had a nice gap up, a bullish follow-through after rejecting lows on Thursday, on better than expected earnings from JPM and C. To wit

“Gains in financial shares lifted stocks Friday in the wake of better-than-expected earnings reports from three big U.S. banks.

Financial stocks in the S&P 500 rose as much as 1.5% after J.P. Morgan Chase, Citigroup and Wells Fargo reported earnings that beat analysts’ estimates, then pared those gains to end the day up 0.5%.”

http://www.wsj.com/articles/stocks-rise-ahead-of-u-s-bank-earnings-1476431807

However, bulls ran out of steam and not even dovish comments from Yellen were able to keep the momentum, and despite green, markets closed near lows to end the session. This is a significant bearish development, as it meant the major indices, including SPX and Nasdaq, failed to recapture the bullish trendline and hence most likely we are headed back to retest Thursday’s lows. Or worse, judging by deteriorating technicals in QQQ, a more severe correction is due.

20161015-QQQ.png

The poster child of this recent corrective move is no doubt the biotechs (IBB) which were the worst sector on the week down a whopping 6%. As warned on Thursday, after breaking through recent consolidation bulls ought to stay away until at least the 200DMA which is a magnet the downside. After Friday’s drubbing, IBB is now 3 dollars away from the 200WMA with a bearish MACD crossover. If broader markets suffer a correction from here, a case could be made IBB is headed for the lower Bollinger band at 252.

20161015-IBB.png

Utilities (XLU) and REITs (IYR) were the bright spots, and managed to close green on the week despite Treasury Bonds (TLT) once again sold off into the end of the week. On the TLT, the weak weekly close has major ramifications. As highlighted previously, the TLT has been closely mimicking the sell-off in 2015, and by breaking the swing point from September, it is another validation of the pattern. If the pattern continues to play out, we will chop lower towards 50WMA and would ultimately punch through it.

20161015-TLT.png

Meanwhile, in commodities space, crude oil was the spotlight after Russia’s backing of OPEC production freeze. Although off the highs from 51, crude was able to settle above 50 on a weekly basis, which was the line in the sand and sets the stage for further upside. More conservative bulls would want another weekly close above current level to double confirm the breakout.

20161015-CLweekly.png

Last but not the least, in currencies space, as mentioned throughout the week, the US Dollar has been the star with the DXY closing at highs of the week at 98.  It confirmed a breakout from July swing highs and descending wedge, and likely marches towards top of channel which sits just under 100.

20161015-DXY.png

We have not talked about Gold this week, as it lacked either conviction to bounce or drop further after the previous week’s carnage. It could be simply be calm before the storm. One thing for sure, volatility is creeping back in every asset class from Equities to Bonds, Commodities to FX. In the case of Equities, keep a close eye on VIX index, as a break above 17 would portend an explosive move and as one would say don’t step in front of the freight train (if you are a bull).

20161015-VIX.png

 

 

 

Daily Market Snapshot

Sector ETFs by Weekly Return %

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
XLU SPDR Select Sector Fund – Utilities 47.75  

-0.27

-0.56%

1.34% -2.53%
IYR iShares Dow Jones U.S. Real Estate Index Fund 77.43  

-0.26

-0.34%

1.15% -3.98%
XLP SPDR Select Sector Fund – Consumer Staples 52.37  

0.01

0.02%

0.08% -1.58%
DIA Dow Jones Industrial Average ETF 181.29  

0.45

0.25%

-0.51% -0.82%
XLK SPDR Select Sector Fund – Technology 47.37  

0.18

0.38%

-0.52% -0.86%
XLI SPDR Select Sector Fund – Industrial 57.23  

0.12

0.21%

-0.57% -1.97%
XLFS S&P SmallCap Financials Portfolio 30.73  

0.25

0.82%

-0.71% 0.92%
XLG Rydex Russell Top 50 ETF 151.35  

0.31

0.21%

-0.74% -0.93%
PFF iShares S&P US Preferred Stock Fund 38.87  

0.12

0.31%

-0.77% -1.59%
SPY SPDR S&P 500 213.12  

0.11

0.05%

-0.89% -1.47%
XLF SPDR Select Sector Fund – Financial 19.42  

0.09

0.46%

-1.02% 0.62%
XLY SPDR Select Sector Fund – Consumer Discretionary 78.89  

-0.09

-0.11%

-1.07% -1.44%
QQQ PowerShares QQQ Trust 117.14  

0.14

0.12%

-1.12% -1.33%
XLE SPDR Select Sector Fund – Energy Select Sector 69.8  

-0.41

-0.59%

-1.15% -1.15%
XLB Materials Select Sector SPDR 46.32  

0.15

0.32%

-1.15% -2.99%
XRT SPDR S&P Retail ETF 43.12  

-0.09

-0.21%

-1.66% -0.99%
IWM iShares Russell 2000 120.43  

-0.49

-0.41%

-1.95% -3.04%
KRE SPDR KBW Regional Banking ETF 42  

0.21

0.50%

-2.87% -0.64%
SMH HOLDRS Merrill Lynch Semiconductor 67.62  

0.43

0.64%

-2.87% -2.66%
XLV SPDR Select Sector Fund – Health Care 69.62  

-0.47

-0.67%

-3.13% -3.45%
IBB iShares Nasdaq Biotechnology 266.08  

-5.03

-1.87%

-6.34% -8.08%

 

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) WTD % MTD %
USO United States Oil Fund 11.44  

-0.05

-0.44%

0.97% 4.67%
DBA PowerShares DB Agriculture Fund 20.18  

0.1

0.50%

0.65% 1%
GDX Market Vectors TR Gold Miners 22.99  

-0.5

-2.15%

-0.04% -13.02%
AGG iShares Barclays Aggregate Bond Fund 111.37  

-0.19

-0.17%

-0.19% -0.93%
SLV iShares Silver Trust 16.56  

-0.05

-0.30%

-0.24% -9.01%
GLD SPDR Gold Trust 119.36  

-0.67

-0.56%

-0.32% -5%
HYG iShares iBoxx $ HY Corp Bond Fund 86.86  

0.2

0.23%

-0.33% -0.46%
LQD iBoxx $ Investment Grade Corporate Bond Fund 121.62  

-0.57

-0.47%

-0.40% -1.27%
TLT iShares Barclays 20 Year Treasury Bond Fund 131.59  

-1.87

-1.41%

-1.74% -4.13%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
EWZ iShares MSCI Brazil Index Fund 36.05  

0.22

0.61%

1.66% 6.88%
EWW iShares MSCI Mexico Index Fund 49.98  

-0.15

-0.30%

1.61% 3.09%
EWC iShares MSCI Canada Index Fund 25.42  

0.04

0.16%

1.11% -1.05%
DXJ WisdomTree Japan Total Dividend Fund 43.77  

0.23

0.53%

0.21% 2%
EWA iShares MSCI Australia Index Fund 20.7  

0.03

0.15%

-0.62% -0.96%
EWP iShares MSCI Spain Index Fund 26.18  

0.15

0.57%

-0.76% -2.39%
EWJ iShares MSCI Japan Index Fund 12.34  

0

0%

-0.88% -1.59%
EWK iShares MSCI Belgium Index Fund 18.44  

-0.01

-0.05%

-1.07% -2.23%
EWI iShares MSCI Italy Index Fund 10.87  

0.09

0.83%

-1.09% -1.36%
EWO iShares MSCI Austria Index Fund 16.06  

0.07

0.44%

-1.11% -1.59%
EWG iShares MSCI Germany Index Fund 25.77  

0.13

0.51%

-1.19% -1.90%
EWQ iShares MSCI France Index Fund 23.73  

0.08

0.34%

-1.21% -1.78%
EWL iShares MSCI Switzerland Index Fund 29.72  

0.09

0.30%

-1.46% -2.72%
EWM iShares MSCI Malaysia Index Fund 7.94  

-0.04

-0.50%

-1.61% -2.10%
EWT iShares MSCI Taiwan Index Fund 15.46  

-0.07

-0.45%

-1.84% -1.53%
EWX SPDR S&P Emerging Markets Small Cap ETF 42.75  

0.15

0.35%

-1.93% -0.95%
EEM iShares MSCI Emerging Index Fund 36.88  

0.06

0.16%

-2.15% -1.52%
EWH iShares MSCI Hong Kong Index Fund 21.62  

0.13

0.60%

-2.17% -1.77%
EWN iShares MSCI Netherlands Index Fund 24.3  

0.03

0.12%

-2.33% -3.03%
FXI iShares FTSE/Xinhua China 25 Index Fund 37.59  

0.36

0.96%

-2.34% -1.10%
EWU iShares MSCI United Kingdom Index Fund 15.1  

-0.05

-0.33%

-2.89% -4.67%
EWS iShares MSCI Singapore Index Fund 10.38  

-0.01

-0.10%

-3.17% -4.42%
EWD iShares MSCI Sweden Index Fund 28.2  

0.09

0.32%

-3.26% -2.99%
EWY iShares MSCI South Korea Index Fund 55.36  

-0.18

-0.32%

-3.91% -4.77%

 

 

 

 

 

Week Ahead – Events and Economic Data

10/17 Monday

Time Event / Data
9:15am Industrial Production

 

10/18 Tuesday

Time Event / Data
8:30am CPI

 

10/19 Wednesday

Time Event / Data
8:30am Housing Starts
10:30am Crude Oil Inventories
9:00pm Final Presidential Debate

 

10/20 Thursday

Time Event / Data
8:30am Initial Claims
10:00am Existing Home Sales

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s