Macro Market · Market Commentary · Newsletter

Daily Commentary – No Bad Blood

Just as you thought the historic election outcome was shocking, perhaps especially from the eyes of Wall Street analysts given the warnings of a market crash in a Trump victory, the next day the US stock markets received the presidency results in a not possibly more amazing and admirable way. From the bottom to the top, the S&P futures rallied 140pts while the lead dog Dow squeezed right at YTD highs and broken uptrend.

20161110-INDU.png

While anti-Trump protestors are heading in droves to the street demonstrating the outcome, quite simply there was no bad blood in Wall Street, as “Investors embraced the election of Donald Trump as president, snapping up stocks and selling bonds in a bet that the Republican’s plans for fiscal stimulus will succeed in breaking the U.S. out of a postcrisis economic funk.”

http://www.wsj.com/articles/european-stocks-dive-2-as-trump-s-startling-victory-sends-global-markets-into-disarray-1478679094

Indeed, while US stocks had a speculator move, the bond market was trounced in perhaps even more extraordinary way with the 30y launching a whopping 26bps. We have focused on the correction in Treasuries for quite some time, as the TLT has been closely mimicking the chart pattern in 2015 for about 9 months, from the exhaustion spike rally to its subsequent sell-off. At this stage, by plunging through 50WMA with conviction, we may be in the final stage of the correction as TLT would chop around and eventually stabilize over the coming weeks.

20161110-TLT.png

Sector-wise, given the bond market rout, Utiilties (XLU) and REITs (IYR) were the substantial underperformers, down 3.8% and 1.9% respectively. On the green side, Biotechs (IBB) celebrated Clinton’s defeat empathically with an 8.6% gain. The weekly chart is the one we ought to focus on, as IBB could confirm a 20-50WMA golden cross, which could signal the beginning of another bull market like it did in 2012:

20161110-ibb

The banking sector had a stellar day as well with 4.16% rise in XLF, which posted fresh post-crisis highs at 20.84 and next target is 21.5 area.

20161110-XLF.png

In commodities space, the spotlight was Gold which had a massive fake out to the upside before crumbling all the way back under 200DMA on risk aversion trade unwind, and the momentum points to further drop in Gold towards the neckline of a large H&S pattern.

20161110-GLD.png

On the other hand, the US Dollar enjoyed the polar opposite of Gold’s dump, launching all the way up to the top of descending channel. We will now see whether the weekly close will confirm a breakout topside or a mere retest before backing down again.

20161110-DXY.png

So where do we go from here? While we were caught off side in our outlook yesterday when we said we expected a pump and dump, we also said not to jump into conclusions until the market digests the event. The most important thing in this business is to respect the price action, and that is why we rely on our quantitative signals to filter the noise when it comes to trading and portfolio allocation decisions.  The momentum is now obviously back in bulls’ favor, but whether this is a game changer, we need to continue to focus on Russell 2000 (IWM). As highlighted previously, the line in the sand between a bull and bear market for IWM is the 20WMA, and as of today IWM is solidly back above with the caveat that we have 2 more trading days to go before the week end. Should we get a confirmed close above 20WMA on a weekly basis, the message from the market is to be long and enjoy the Santa Claus rally.

20161110-IWM.png

 

 

 

Daily Market Snapshot

Sector ETFs by Daily Return %

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
IBB iShares Nasdaq Biotechnology 284.99  

23.37

8.56%

13.23% 11.03%
KRE SPDR KBW Regional Banking ETF 46.45  

2.48

5.49%

8.05% 6.07%
XLF SPDR Select Sector Fund – Financial 20.84  

0.85

4.16%

6.93% 5.57%
XLFS S&P SmallCap Financials Portfolio 32.85  

1.3

4.04%

6.83% 5.49%
XLV SPDR Select Sector Fund – Health Care 70.78  

2.41

3.46%

6.47% 5.08%
IWM iShares Russell 2000 122.54  

3.66

3.03%

5.88% 3.41%
XLI SPDR Select Sector Fund – Industrial 59.67  

1.46

2.48%

5.67% 4.30%
XLB Materials Select Sector SPDR 48.26  

1

2.09%

4.01% 3.23%
XRT SPDR S&P Retail ETF 42.59  

0.88

2.09%

3.70% 0.85%
XLE SPDR Select Sector Fund – Energy Select Sector 70.45  

1.13

1.62%

3.95% 2.67%
DIA Dow Jones Industrial Average ETF 185.96  

2.58

1.40%

4.06% 2.64%
XLG Rydex Russell Top 50 ETF 152.66  

1.86

1.23%

3.83% 1.75%
SPY SPDR S&P 500 216.38  

2.27

1.05%

3.75% 1.80%
QQQ PowerShares QQQ Trust 117.65  

0.54

0.46%

3.52% 0.56%
XLY SPDR Select Sector Fund – Consumer Discretionary 78.98  

0.16

0.20%

2.93% 1.13%
XLK SPDR Select Sector Fund – Technology 47.35  

-0.06

-0.13%

2.53% -0.15%
PFF iShares S&P US Preferred Stock Fund 37.93  

-0.21

-0.55%

-0.55% -2.62%
SMH HOLDRS Merrill Lynch Semiconductor 68.16  

-0.55

-0.80%

2.36% -0.16%
XLP SPDR Select Sector Fund – Consumer Staples 51.98  

-0.72

-1.38%

0.72% -1.55%
IYR iShares Dow Jones U.S. Real Estate Index Fund 74.22  

-1.4

-1.87%

0.37% -3.16%
XLU SPDR Select Sector Fund – Utilities 47.36  

-1.81

-3.75%

-1.23% -4.19%

 

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) WTD % MTD %
GDX Market Vectors TR Gold Miners 24.59  

0.63

2.60%

-1.91% 0.29%
USO United States Oil Fund 10.28  

0.18

1.77%

3.01% -2.37%
SLV iShares Silver Trust 17.45  

0.05

0.29%

-0.06% 2.83%
GLD SPDR Gold Trust 121.56  

-0.08

-0.07%

-2.28% -0.31%
DBA PowerShares DB Agriculture Fund 20.34  

-0.09

-0.44%

-0.39% -0.88%
HYG iShares iBoxx $ HY Corp Bond Fund 85.38  

-0.6

-0.70%

0.47% -0.74%
AGG iShares Barclays Aggregate Bond Fund 109.9  

-1.03

-0.93%

-1.20% -1.26%
LQD iBoxx $ Investment Grade Corporate Bond Fund 118.69  

-1.77

-1.48%

-1.75% -1.89%
TLT iShares Barclays 20 Year Treasury Bond Fund 124.57  

-5.52

-4.34%

-5.44% -5.09%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
EWU iShares MSCI United Kingdom Index Fund 30.39  

0.38

1.26%

3.16% 102.60%
EWL iShares MSCI Switzerland Index Fund 29.48  

0.33

1.13%

2.97% 1.62%
EWD iShares MSCI Sweden Index Fund 27.69  

0.23

0.83%

2.94% 0.54%
EWQ iShares MSCI France Index Fund 24.07  

0.08

0.33%

2.29% 0.08%
EWC iShares MSCI Canada Index Fund 25.45  

0.04

0.16%

2.09% 0.39%
EWG iShares MSCI Germany Index Fund 25.65  

0.01

0.04%

1.83% -1%
EWO iShares MSCI Austria Index Fund 16.44  

0

0%

1.67% 0%
DXJ WisdomTree Japan Total Dividend Fund 44.65  

-0.08

-0.18%

2.93% -1.11%
EWK iShares MSCI Belgium Index Fund 17.69  

-0.05

-0.28%

1.03% -1.17%
EWN iShares MSCI Netherlands Index Fund 24.31  

-0.1

-0.41%

1.55% -0.69%
EWA iShares MSCI Australia Index Fund 20.53  

-0.15

-0.73%

3.17% 1.23%
EWI iShares MSCI Italy Index Fund 22.14  

-0.18

-0.81%

2.31% 96.28%
EWJ iShares MSCI Japan Index Fund 49.39  

-0.42

-0.85%

-0.26% 291.05%
EWP iShares MSCI Spain Index Fund 26.8  

-0.34

-1.26%

0.41% -2.37%
EWH iShares MSCI Hong Kong Index Fund 21.01  

-0.31

-1.46%

-0.57% -2.60%
EWS iShares MSCI Singapore Index Fund 20.74  

-0.32

-1.53%

0.97% 100.39%
FXI iShares FTSE/Xinhua China 25 Index Fund 36.74  

-0.89

-2.39%

1.38% -0.33%
EWX SPDR S&P Emerging Markets Small Cap ETF 41.57  

-1.27

-3.01%

0.02% -3.33%
EEM iShares MSCI Emerging Index Fund 36.25  

-1.22

-3.31%

0.89% -2.40%
EWZ iShares MSCI Brazil Index Fund 36.31  

-1.23

-3.33%

2.69% -3.84%
EWT iShares MSCI Taiwan Index Fund 30.65  

-1.09

-3.49%

0.10% 94.48%
EWM iShares MSCI Malaysia Index Fund 30.88  

-1.28

-4.06%

-1.40% 286.97%
EWY iShares MSCI South Korea Index Fund 53.73  

-2.64

-4.80%

-1.20% -2.93%
EWW iShares MSCI Mexico Index Fund 48.29  

-4.5

-8.91%

-2.15% -5%

 

 

 

Week Ahead – Events and Economic Data

11/10 Thursday

Time Event / Data
8:30am Initial Jobless Claims

 

 

11/11 Friday

Time Event / Data
10:00 Michigan Consumer Confidence

 

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