Macro Market · Market Commentary · Newsletter

Daily Commentary – Zig-Zac

It’s still October, and so the chopfest drags on for SPX and Dow, as both indices continue recent zigzag pattern of testing and failing at descending downtrend and pulling back the following day. Given recent history continues, we would likely see the recent lows tested tomorrow before bouncing again.

20161026-INDU.png

The weakness was blamed on weak confidence data and earnings from CAT, as well as suddenly crumbling crude oil, which fell steeply below the psychological $50 price point. The catalysts the twofold in the continuation of uncertainty with OPEC as well as an unexpected buildup in inventory:

http://oilprice.com/Latest-Energy-News/World-News/Oil-Prices-Plunge-After-API-Reports-Significant-Build-To-US-Crude-Stocks.html

To wit, “This week’s inventory build will likely press further down on oil prices, which were already trading down on the market’s increasing uneasiness over the OPEC drama, including Iraq’s OPEC rebellion, Russia’s vague and vacillating comments as to whether they’ll join in a freeze or a cut.”

The plunge below 50 meant the ST up channel since October has been broken, and August swing point would be next support just south of 49. On a weekly basis, a close back under 50 would be very bearish as it will not only confirm a key reversal but also a false breakout from inverse H&S.

20161026-CLDAily.png

That said, a weaker US dollar may provide a boost to oil as well as other commodities, as today the DXY has a key reversal after higher highs were rejected and a shooting star candle was formed. Historically, this type of reversal candle has a high probability of bearish follow-through in coming days.

20161026-DXY.png

A weaker USD certainly would provide tailwind to the recovery bounce in gold, which sliced through the ST downtrend and closed just a hair above 20DMA. Although we believe the retracement still has some legs, medium-term picture for gold remains bearish as H&S pattern points to lower lows ahead. Bounces towards 1300 would be seen as a great shorting opportunity.

20161026-GOLD.png

Back to the equity markets, on the heels of weaker than expected consumer confidence, XLY (Consumer Discretionary) was the weakling, down -1.2%. On the other hand, Utilities (XLU) and Consumer Staples (XLP) were the two safe-haven sectors today in the green. For the latter, further gains are expected after breaking through multiple resistance with 3 consecutive green closes. That said, medium-term picture looks similar to gold where a large H&S appears to be forming:

20161026-XLP.png

Last but not least, we obviously ought to look at the leader of the market in QQQ, which gave back some of previous day’s gains and closed right at earlier month highs. However, following AAPL’s tumbling after-hours, further pressure can be expected tomorrow. “Revenues dropped 9% from last year to $46.9 billion with 45.5 million iPhones sold (down 5% from last year but slightly ahead of expectations). Earnings of $9 billion was a whopping 19% decline from last year. China sales were down 30% from last year.”

http://investorplace.com/2016/10/stock-market-today-nyse-dow-jones-industrial-average-investing-news-crude-oil-apple-stock-aapl/

With futures in the red, QQQ will drop to fill gap at 20DMA, though since ST momentum turned positive, benefit of the doubt still goes to the bulls that higher highs are to follow after this retracement. Thursday will be the day of fireworks with the tech giant duo of Amazon and Alphabet reporting

20161026-QQQ.png

Daily Market Snapshot

Sector ETFs by Daily Return %

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
XLU SPDR Select Sector Fund – Utilities 48.48 0.3

0.62%

1% -1.04%
XLP SPDR Select Sector Fund – Consumer Staples 52.76 0.19

0.36%

1.01% -0.85%
PFF iShares S&P US Preferred Stock Fund 39.45 0.06

0.15%

0.23% -0.13%
XLG Rydex Russell Top 50 ETF 151.87 -0.09

-0.06%

0.48% -0.59%
XLF SPDR Select Sector Fund – Financial 19.69 -0.02

-0.10%

0.20% 2.02%
IYR iShares Dow Jones U.S. Real Estate Index Fund 78.05 -0.15

-0.19%

0.08% -3.21%
XLI SPDR Select Sector Fund – Industrial 56.95 -0.15

-0.26%

-0.07% -2.45%
DIA Dow Jones Industrial Average ETF 181.48 -0.48

-0.26%

0.14% -0.71%
SMH HOLDRS Merrill Lynch Semiconductor 68.58 -0.19

-0.28%

1% -1.28%
XLV SPDR Select Sector Fund – Health Care 69.38 -0.2

-0.29%

-0.47% -3.79%
QQQ PowerShares QQQ Trust 119.19 -0.38

-0.32%

0.88% 0.40%
XLFS S&P SmallCap Financials Portfolio 31.03 -0.1

-0.32%

0.06% 1.90%
SPY SPDR S&P 500 214.17 -0.72

-0.34%

0.09% -0.98%
XLK SPDR Select Sector Fund – Technology 47.82 -0.17

-0.35%

0.61% 0.08%
KRE SPDR KBW Regional Banking ETF 43.38 -0.16

-0.37%

0.44% 2.63%
XLE SPDR Select Sector Fund – Energy Select Sector 69.66 -0.32

-0.46%

-0.76% -1.35%
IBB iShares Nasdaq Biotechnology 265.18 -1.23

-0.46%

-0.97% -8.39%
IWM iShares Russell 2000 120.93 -0.91

-0.75%

-0.12% -2.64%
XRT SPDR S&P Retail ETF 42.88 -0.37

-0.86%

-0.16% -1.54%
XLB Materials Select Sector SPDR 46.74 -0.43

-0.92%

-0.68% -2.12%
XLY SPDR Select Sector Fund – Consumer Discretionary 79.22 -0.94

-1.18%

-0.46% -1.02%

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) WTD % MTD %
GDX Market Vectors TR Gold Miners 24.65 0.56

2.30%

0.12% -6.73%
SLV iShares Silver Trust 16.86 0.16

0.95%

1.26% -7.36%
GLD SPDR Gold Trust 121.47 0.91

0.75%

0.53% -3.32%
DBA PowerShares DB Agriculture Fund 20.58 0.13

0.63%

1.48% 3%
TLT iShares Barclays 20 Year Treasury Bond Fund 133.08 0.35

0.26%

-0.17% -3.05%
AGG iShares Barclays Aggregate Bond Fund 111.66 0

0%

-0.15% -0.68%
HYG iShares iBoxx $ HY Corp Bond Fund 87.37 -0.05

-0.06%

0% 0.13%
LQD iBoxx $ Investment Grade Corporate Bond Fund 122.07 -0.09

-0.07%

-0.36% -0.90%
USO United States Oil Fund 11.24 -0.19

-1.68%

-2.09% 2.84%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
EWA iShares MSCI Australia Index Fund 20.86 0.17

0.82%

0.63% -0.19%
EWT iShares MSCI Taiwan Index Fund 15.91 0.07

0.44%

1.08% 1.34%
EWO iShares MSCI Austria Index Fund 16.54 0.05

0.30%

1.53% 1.35%
EWZ iShares MSCI Brazil Index Fund 38.19 0.11

0.29%

1.11% 13.22%
EEM iShares MSCI Emerging Index Fund 37.8 0.04

0.11%

0.53% 0.93%
EWJ iShares MSCI Japan Index Fund 12.6 0.01

0.08%

0.24% 0.48%
EWG iShares MSCI Germany Index Fund 25.93 0.01

0.04%

0.35% -1.29%
EWY iShares MSCI South Korea Index Fund 56.49 0.02

0.04%

0.53% -2.82%
EWX SPDR S&P Emerging Markets Small Cap ETF 43.63 0

0%

0.28% 1.09%
EWM iShares MSCI Malaysia Index Fund 8.1 0

0%

0.62% -0.12%
EWC iShares MSCI Canada Index Fund 25.56 -0.02

-0.08%

-0.54% -0.51%
DXJ WisdomTree Japan Total Dividend Fund 44.7 -0.04

-0.09%

0.38% 4.17%
EWS iShares MSCI Singapore Index Fund 10.5 -0.01

-0.10%

0.77% -3.31%
EWU iShares MSCI United Kingdom Index Fund 15.11 -0.02

-0.13%

-0.66% -4.61%
EWH iShares MSCI Hong Kong Index Fund 22.02 -0.04

-0.18%

0.87% 0.05%
EWK iShares MSCI Belgium Index Fund 18.26 -0.04

-0.22%

-0.49% -3.18%
EWI iShares MSCI Italy Index Fund 11.25 -0.03

-0.27%

0.36% 2.09%
EWD iShares MSCI Sweden Index Fund 28.13 -0.08

-0.28%

-0.81% -3.23%
EWN iShares MSCI Netherlands Index Fund 24.56 -0.08

-0.33%

0.20% -2%
FXI iShares FTSE/Xinhua China 25 Index Fund 37.97 -0.14

-0.37%

0.37% -0.11%
EWQ iShares MSCI France Index Fund 23.92 -0.09

-0.38%

-0.04% -0.99%
EWW iShares MSCI Mexico Index Fund 51.86 -0.27

-0.52%

-0.17% 6.97%
EWP iShares MSCI Spain Index Fund 27.2 -0.19

-0.70%

0.52% 1.42%
EWL iShares MSCI Switzerland Index Fund 29.14 -0.23

-0.79%

-1.52% -4.62%

Week Ahead – Events and Economic Data

10/26 Wednesday

Time Event / Data
8:30am U.S. Trade Deficit
10:00am New Home Sales

10/27 Thursday

Time Event / Data
8:30am Initial Jobless Claims, Durable Goods
10:00am Pending Home Sales
After the close GOOGL, AMZN Earnings

10/28 Friday

Time Event / Data
8:30am Q3 GDP (Advance), Employment Cost Index
10:00am Consumer Sentiment

Earning Schedule (Source: Earnings Whisper)

20161022-Earnings.png

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