Macro Market · Market Commentary · Newsletter

Daily Commentary – Back Against the Wall

Relatively quiet start to the week with US equity markets in a narrow range, as SPX and Dow followed through to Friday’s weak close with a -6pt and -52pt decline respectively. No change to the technical picture, as markets are on shaky ground ever since slicing through bullish trendline. At the same time, key indices still have yet to punch through critical horizontal breakout support. Until that floodgate is broken, we remain in sideways trading range with a negative bias.

20161018-SPX.png

The index that we ought to focus on is the small caps Russell 2000 (IWM), which has been the lead dog in this corrective move down -3.3% MTD. With its back against the wall at the bottom of a critical up channel line, IWM needs to bounce from here or risk an accelerated plunge to 118 and dragging the rest of markets down with it.

20161018-IWM.png

Elsewhere, bonds recovered from overnight losses with TLT up 0.6%. Again no change to bigger picture as we only see this an oversold bounce. XLU and IYR were the beneficiaries which outperformed the broader markets on the day with the former +0.5% but remains capped by descending channel.

20161018-XLU.png

Anxiety was evident again in Biotechs (IBB) as it sold off towards the 200WMA magnet early morning, though was able to recover and close with a doji candle. This is a sign that selling is getting exhausted in the short-term and thus likely we get a relief bounce towards 200DMA.

20161017-IBB.png

It has been a while since we take a look at energy sector (XLE), which continues to oscillate between a 6-month bullish channel. The failure to break out from the channel in spite of bullish oil headlines from Russia is a negative sign, especially with deteriorating technicals including a confirmed bearish crossover in MACD today. Stay neutral until we either breakout or are back to bottom of channel.

20161017-XLE.png

The worst performing sector of the day was actually Retail (XRT) and Consumer Discretionary (XLY), -1% and -0.8% respectively. For the XRT, it plunged through 200DMA and closed at crucial July breakout area. Yet another floodgate level to watch.

20161017-XRT.png

Earnings take center stage this week with big names from Microsoft (MSFT) to Generic Electric (GE) set to report. This morning, we had Bank of America (BAC) beating estimates handily which was catalytic in S&P futures’ recovery from negative territory. “On a pretax basis, quarterly profit was at its highest in a decade. Net income attributable to shareholders rose 6.6 percent to $4.45 billion in the third quarter ended Sept. 30 from a year ago. Earnings per share rose to 41 cents, from 38 cents in the same period of 2015. Analysts, on average, had estimated a decline to 34 cents a share.”

http://www.reuters.com/article/us-bankofamerica-results-idUSKBN12H149

Then after the bell, the focal points were Netflix (NFLX) and IBM, which had contrasting results as the former “goes wild”, soaring 20% after earnings beat and subscribers soar. This is giving a lift to Nasdaq futures as we write. Meanwhile, IBM was not able to reverse the streak of 17th consecutive revenue drop and as a result -3% AH and is weighing on the Dow futures.

http://www.cnbc.com/2016/10/17/netflix-reports-q3-earnings.html

http://www.zerohedge.com/news/2016-10-17/ibm-sinks-after-18th-consecutive-revenue-drop-margins-miss-eps-beats-tax-rate-fudge

This week’s most focused earnings shown below per EarningsWhispers, notably Goldman Sachs (GS) before the open and Intel (INTL) after the close:

earnings2016Q4.jpg

Daily Market Snapshot

Sector ETFs by Weekly Return %

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
XLU SPDR Select Sector Fund – Utilities 48.01  

0.26

0.54%

0.54% -2%
IYR iShares Dow Jones U.S. Real Estate Index Fund 77.53  

0.1

0.13%

0.13% -3.86%
XLB Materials Select Sector SPDR 46.36  

0.04

0.09%

0.09% -2.91%
PFF iShares S&P US Preferred Stock Fund 38.87  

0

0%

0% -1.59%
IWM iShares Russell 2000 120.29  

-0.14

-0.12%

-0.12% -3.16%
IBB iShares Nasdaq Biotechnology 265.72  

-0.36

-0.14%

-0.14% -8.20%
XLK SPDR Select Sector Fund – Technology 47.27  

-0.1

-0.21%

-0.21% -1.07%
XLI SPDR Select Sector Fund – Industrial 57.08  

-0.15

-0.26%

-0.26% -2.23%
QQQ PowerShares QQQ Trust 116.82  

-0.32

-0.27%

-0.27% -1.60%
DIA Dow Jones Industrial Average ETF 180.72  

-0.57

-0.31%

-0.31% -1.13%
XLV SPDR Select Sector Fund – Health Care 69.39  

-0.23

-0.33%

-0.33% -3.77%
XLG Rydex Russell Top 50 ETF 150.84  

-0.51

-0.34%

-0.34% -1.26%
SPY SPDR S&P 500 212.38  

-0.74

-0.35%

-0.35% -1.81%
SMH HOLDRS Merrill Lynch Semiconductor 67.34  

-0.28

-0.41%

-0.41% -3.07%
XLF SPDR Select Sector Fund – Financial 19.33  

-0.09

-0.46%

-0.46% 0.16%
XLP SPDR Select Sector Fund – Consumer Staples 52.12  

-0.25

-0.48%

-0.48% -2.05%
XLE SPDR Select Sector Fund – Energy Select Sector 69.46  

-0.34

-0.49%

-0.49% -1.63%
KRE SPDR KBW Regional Banking ETF 41.71  

-0.29

-0.69%

-0.69% -1.32%
XLFS S&P SmallCap Financials Portfolio 30.51  

-0.22

-0.72%

-0.72% 0.20%
XLY SPDR Select Sector Fund – Consumer Discretionary 78.24  

-0.65

-0.83%

-0.82% -2.25%
XRT SPDR S&P Retail ETF 42.7  

-0.42

-0.98%

-0.97% -1.95%

 

 

 

 

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) WTD % MTD %
GDX Market Vectors TR Gold Miners 23.34  

0.35

1.51%

1.52% -11.69%
TLT iShares Barclays 20 Year Treasury Bond Fund 132.43  

0.84

0.64%

0.64% -3.52%
DBA PowerShares DB Agriculture Fund 20.28  

0.1

0.49%

0.50% 1.50%
LQD iBoxx $ Investment Grade Corporate Bond Fund 122.02  

0.4

0.33%

0.33% -0.94%
GLD SPDR Gold Trust 119.68  

0.32

0.27%

0.27% -4.74%
AGG iShares Barclays Aggregate Bond Fund 111.56  

0.19

0.17%

0.17% -0.76%
SLV iShares Silver Trust 16.57  

0.01

0.06%

0.06% -8.96%
HYG iShares iBoxx $ HY Corp Bond Fund 86.74  

-0.12

-0.14%

-0.14% -0.60%
USO United States Oil Fund 11.37  

-0.07

-0.61%

-0.61% 4.03%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
EWZ iShares MSCI Brazil Index Fund 36.47  

0.42

1.16%

1.17% 8.12%
EWI iShares MSCI Italy Index Fund 10.94  

0.07

0.64%

0.64% -0.73%
EWY iShares MSCI South Korea Index Fund 55.67  

0.31

0.56%

0.56% -4.23%
EWW iShares MSCI Mexico Index Fund 50.21  

0.23

0.46%

0.46% 3.57%
EWS iShares MSCI Singapore Index Fund 10.41  

0.03

0.29%

0.29% -4.14%
EWC iShares MSCI Canada Index Fund 25.49  

0.07

0.27%

0.28% -0.78%
EWP iShares MSCI Spain Index Fund 26.23  

0.05

0.19%

0.19% -2.20%
EWO iShares MSCI Austria Index Fund 16.08  

0.02

0.12%

0.12% -1.47%
EWJ iShares MSCI Japan Index Fund 12.35  

0.01

0.08%

0.08% -1.52%
EWQ iShares MSCI France Index Fund 23.72  

-0.01

-0.04%

-0.04% -1.82%
DXJ WisdomTree Japan Total Dividend Fund 43.75  

-0.02

-0.05%

-0.05% 1.96%
EWT iShares MSCI Taiwan Index Fund 15.45  

-0.01

-0.06%

-0.06% -1.59%
EEM iShares MSCI Emerging Index Fund 36.84  

-0.04

-0.11%

-0.11% -1.63%
EWK iShares MSCI Belgium Index Fund 18.42  

-0.02

-0.11%

-0.11% -2.33%
EWN iShares MSCI Netherlands Index Fund 24.27  

-0.03

-0.12%

-0.12% -3.15%
EWD iShares MSCI Sweden Index Fund 28.15  

-0.05

-0.18%

-0.18% -3.16%
EWX SPDR S&P Emerging Markets Small Cap ETF 42.67  

-0.08

-0.19%

-0.19% -1.14%
EWA iShares MSCI Australia Index Fund 20.64  

-0.06

-0.29%

-0.29% -1.24%
EWG iShares MSCI Germany Index Fund 25.67  

-0.1

-0.39%

-0.39% -2.28%
EWM iShares MSCI Malaysia Index Fund 7.9  

-0.04

-0.51%

-0.50% -2.59%
EWH iShares MSCI Hong Kong Index Fund 21.51  

-0.11

-0.51%

-0.51% -2.27%
EWL iShares MSCI Switzerland Index Fund 29.52  

-0.2

-0.68%

-0.67% -3.37%
EWU iShares MSCI United Kingdom Index Fund 14.99  

-0.11

-0.73%

-0.73% -5.37%
FXI iShares FTSE/Xinhua China 25 Index Fund 37.25  

-0.34

-0.91%

-0.90% -2%

 

Week Ahead – Events and Economic Data

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

 

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