Macro Market · Market Commentary · Newsletter

Daily Commentary – Pre-Election Deja-Vu

Another day, another red close as another 10pts were chipped off SPX. That meant its losing streak has now extended to 8 days, matching the streak set in Oct 2008. Coincidence of not, the losing streak also occurred while heading into the US Election. Though obviously this year we are without a Lehman crisis lingering on us and hence one could explain the rather subdued magnitude of the current sell-off. So what followed the losing streak in Oct 2008? While a big bounce finally ensued, SPX proceeded to make newer lows afterwards and basically chopped sideways in the next month.

20161104-8LosingStreakSPX.png

Post 8-Day Losing Streak SPX Return 2-Days 5-Days 20-Days
2008/10/10 10.42% -1.81% -7.49%

While history never repeats exactly, it does serve as a guideline on what to expect. As mentioned yesterday, volatility is most likely to stay with us regardless of the outcome in the Election and a capitulation move to the downside has yet to occur. Meanwhile, the VIX also went up 8 days in the row. It happened only two other times since 2000 and both occurrences were relatively recent – April 2012 and December 2013. Two striking similarities comparing to the losing streak analysis in SPX: 1) A sizeable two-day bounce would ensue 2) But lower lows would follow.

SPX Return Post 8-Day Up Streak in VIX 2-Days 5-Days 20-Days
2012/4/10/ 2.11% 1.19% -0.37%
2013/12/5 1.30% -1.66% 1.19%
2016/11/3 ? ? ?
Average 1.70% -0.23% 0.41%

20161104-VIXSPX.png

Dissecting the market action today, there was quite a bit of bifurcation. Notably the Dow continues to outperform, clinging onto September lows while the SPX continues dropping unabated. The Nasdaq is playing “catch-down” as the QQQ similarly dropped 8 days in a row just like the SPY to close right at the September lows. With technicals getting oversold, it is increasingly likely we are due for a strong snapback.

20161104-QQQ.png

Sector-wise, surprisingly Energy (XLE) was the top performer with a 0.4% gain despite ongoing wobbles in crude oil, which crumbled to 44 handle. Utilities (XLU) was not far behind with a 0.37% rise, continuing its divergence with REITs (IYR). On the downside, you guessed it, it was none other than biotechs (IBB) which got clobbered once again with a 3% plunge. With the RSI as oversold as in early Feb lows, and the June lows just a hair away, odds are favoring a near-term bottom

20161104-IBB.png

Away from the stock market, the eye-popping move was in the Pound, with the GBP/USD surging 1.3% above a 1-month consolidation and strong downtrend north of 1.24. Technical picture suggests thin air until 1.28 area as further squeeze likely looms. Other GBP pairs also demonstrate trendline breakouts which points to a trend reversal.

20161104-GBPUSD.png

20161104-GBPCHF.png

20161104-EURGBP.png

Tomorrow we will have the pivotal NFP number, the last piece of major economic data release before the US Election next week. With the broader markets and US dollar on shaky grounds, certainly it has the weight of “make-or-break”. From DailyFX, “October Non-Farm Payrolls are expected to have risen by 175K, up from a previous print of 156 with unemployment widely expected to downtick to 4.9%. We’ll also want to keep a close eye on the labor force participation rate which is expected to hold at 62.9% after an uptick last month. On the back of this week’s FOMC release, the average hourly earnings may be of particular interest as the committee looks for ‘further evidence’ that the central bank will be able to achieve the 2% inflation-target over the policy horizon.”

https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/scalping_report/2016/11/03/Forex-NFP-to-Make-or-Break-U.S.-Dollar-Support.html

Will the markets finally bounce like in Oct 2008? Or should we get yet another red close tomorrow, we will most definitely be in uncharted territory. Here is an interesting chart showing where SPX oughts to trade given the various scenarios in US Election courtesy of The Arora Report:

http://thearorareport.com/chart-presidential-election

Daily Market Snapshot

Sector ETFs by Daily Return %

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
XLE SPDR Select Sector Fund – Energy Select Sector 68.14  

0.27

0.40%

-1.77% -0.70%
XLU SPDR Select Sector Fund – Utilities 48.1  

0.18

0.37%

-0.74% -2.69%
XLF SPDR Select Sector Fund – Financial 19.55  

0.02

0.10%

-1.11% -0.96%
KRE SPDR KBW Regional Banking ETF 42.94  

0.03

0.07%

-1.26% -1.94%
XLFS S&P SmallCap Financials Portfolio 30.87  

0.02

0.06%

-1% -0.87%
XLB Materials Select Sector SPDR 46.24  

0.01

0.02%

-1.05% -1.09%
DIA Dow Jones Industrial Average ETF 179.11  

-0.24

-0.13%

-1.24% -1.14%
XLI SPDR Select Sector Fund – Industrial 56.42  

-0.09

-0.16%

-1.19% -1.38%
XLY SPDR Select Sector Fund – Consumer Discretionary 76.88  

-0.2

-0.26%

-1.49% -1.56%
SMH HOLDRS Merrill Lynch Semiconductor 66.94  

-0.28

-0.42%

-1.25% -1.95%
SPY SPDR S&P 500 208.78  

-0.96

-0.46%

-1.77% -1.77%
IWM iShares Russell 2000 115  

-0.56

-0.49%

-2.57% -2.95%
XLG Rydex Russell Top 50 ETF 147.44  

-0.85

-0.57%

-1.92% -1.73%
IYR iShares Dow Jones U.S. Real Estate Index Fund 73.56  

-0.43

-0.58%

-2.60% -4.02%
XLP SPDR Select Sector Fund – Consumer Staples 52.08  

-0.36

-0.69%

-1.12% -1.36%
PFF iShares S&P US Preferred Stock Fund 38.04  

-0.27

-0.71%

-2.51% -2.34%
XLV SPDR Select Sector Fund – Health Care 66.02  

-0.63

-0.95%

-2.60% -1.99%
XLK SPDR Select Sector Fund – Technology 46.26  

-0.45

-0.97%

-2.49% -2.45%
QQQ PowerShares QQQ Trust 114.05  

-1.13

-0.99%

-2.60% -2.51%
XRT SPDR S&P Retail ETF 41.04  

-0.49

-1.19%

-2.59% -2.82%
IBB iShares Nasdaq Biotechnology 246.87  

-7.46

-2.98%

-5.23% -3.82%

 

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) WTD % MTD %
GDX Market Vectors TR Gold Miners 25.3  

0.54

2.16%

6.26% 3.18%
GLD SPDR Gold Trust 124.3  

0.66

0.53%

2.24% 1.94%
HYG iShares iBoxx $ HY Corp Bond Fund 84.94  

0.02

0.02%

-1.55% -1.26%
AGG iShares Barclays Aggregate Bond Fund 111.01  

-0.15

-0.14%

-0.13% -0.26%
DBA PowerShares DB Agriculture Fund 20.42  

-0.04

-0.20%

-1.02% -0.49%
LQD iBoxx $ Investment Grade Corporate Bond Fund 120.45  

-0.24

-0.20%

-0.35% -0.44%
TLT iShares Barclays 20 Year Treasury Bond Fund 130.57  

-1.01

-0.77%

0.09% -0.52%
SLV iShares Silver Trust 17.42  

-0.14

-0.80%

3.26% 2.65%
USO United States Oil Fund 10.08  

-0.2

-1.96%

-8.45% -4.27%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
EWO iShares MSCI Austria Index Fund 16.53  

0.22

1.34%

-0.12% 0.55%
EWW iShares MSCI Mexico Index Fund 48.85  

0.2

0.41%

-3.53% -3.90%
EWS iShares MSCI Singapore Index Fund 10.36  

0.04

0.39%

0.48% 0.10%
EWA iShares MSCI Australia Index Fund 20.06  

0.07

0.35%

-0.50% -1.08%
EWJ iShares MSCI Japan Index Fund 12.53  

0.03

0.24%

-0.71% -0.79%
EWY iShares MSCI South Korea Index Fund 54.54  

0.06

0.11%

-1.29% -1.46%
EWU iShares MSCI United Kingdom Index Fund 14.88  

0.01

0.07%

-0.87% -0.80%
EWQ iShares MSCI France Index Fund 23.8  

0.01

0.04%

-1.08% -1.04%
EWP iShares MSCI Spain Index Fund 27  

0.01

0.04%

-1.60% -1.64%
EWC iShares MSCI Canada Index Fund 25.07  

-0.03

-0.12%

-1.49% -1.10%
FXI iShares FTSE/Xinhua China 25 Index Fund 36.56  

-0.06

-0.16%

-0.79% -0.81%
DXJ WisdomTree Japan Total Dividend Fund 43.82  

-0.09

-0.21%

-2.64% -2.95%
EWT iShares MSCI Taiwan Index Fund 15.4  

-0.04

-0.26%

-1.60% -2.28%
EEM iShares MSCI Emerging Index Fund 36.3  

-0.1

-0.28%

-1.71% -2.26%
EWI iShares MSCI Italy Index Fund 10.95  

-0.04

-0.36%

-3.27% -2.93%
EWH iShares MSCI Hong Kong Index Fund 21.4  

-0.08

-0.37%

-0.93% -0.79%
EWK iShares MSCI Belgium Index Fund 17.67  

-0.09

-0.51%

-1.51% -1.28%
EWD iShares MSCI Sweden Index Fund 27.15  

-0.14

-0.51%

-2.23% -1.42%
EWG iShares MSCI Germany Index Fund 25.37  

-0.14

-0.55%

-1.89% -2.08%
EWN iShares MSCI Netherlands Index Fund 24.06  

-0.15

-0.62%

-1.76% -1.72%
EWL iShares MSCI Switzerland Index Fund 28.71  

-0.21

-0.73%

-1.24% -1.03%
EWM iShares MSCI Malaysia Index Fund 7.88  

-0.07

-0.88%

-1.01% -1.25%
EWZ iShares MSCI Brazil Index Fund 35.51  

-0.32

-0.90%

-5.03% -5.96%
EWX SPDR S&P Emerging Markets Small Cap ETF 41.88  

-0.4

-0.95%

-2.42% -2.60%

 

Day Ahead – Events and Economic Data

11/4 Friday

Time Event / Data
8:30am Nonfarm Payrolls (NFP)
4:00pm FOMC Member Stanley Fischer Speaks
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