Macro Market · Market Commentary · Newsletter

Daily Commentary – The ‘Trump Trade’ Continues

Another day, another continuation of the “Trump Trade” characterized by 1) higher USD 2) higher interest rates 3) higher in Dow & small caps but lower in Tech. Indeed, the Dow has now risen 6 days in a row to yet another ATHs as the panic buying continues unabated. Technically, the Dow closed right at the top of ascending wedge in increasingly extreme overbought technicals based on the RSI.

20161115-indu

The sentiment certainly “trumps” technicals in this environment, as the panic buying and short squeeze (based on the historically high put call ratios we witnessed pre-Election) combined to fuel this rally. But as neatly summarized by Adam Slater, lead economist at Oxford Economics in below MarketWatch article, “Overall investors are taking an optimistic view about both the scale of positive effects from stimulus and protectionist risks. Shifts in these assumptions could see further market swings in the coming months”

http://www.marketwatch.com/story/the-trump-trade-is-shaking-up-markets-around-the-globe-2016-11-14

So we’d beware of these violent one-sided moves and any overbought retracements could just be as violent to the other side.

Talking about overbought, we must take a look at the moonshot in Russell 2000 which along with Dow launched to new highs as well. The IWM is now the 2nd most overbought since 2000 based on the distance between its daily close and upper Bollinger Band (2 standard deviation above its 20 day moving average). Specifically, the current distance of +1.3% is only exceeded by November 2010, during which it stretched to +1.5%. It is worthwhile to note that the breakout in November 2010 eventually led to another 18% gain, and the current descending channel breakout looks rather similar.

20161115-iwm

The skeptics of this rally would point to QQQ’s ongoing negative divergence, as it closed down yet another 1% and right at its critical neckline support. A break below would most likely trigger a waterfall drop similar to the one witnessed in early 2016.

20161115-QQQ.png

We will have to wait and see which pattern (breakout in IWM, or breakdown in QQQ, or both) will play out.  The other two big movers to start the week were none other than US Dollar and Treasuries. For the former, the DXY gapped up on Sunday evening right from the get go, and took little time to spike up to the December 2015 swing point.

20161115-USD.png

Similarly, the one way street north in 30Y yield resumed right from the open, and inching ever closer to the pivotal 200WMA support, which provided a strong bid last two times it was hit in 2015. We believe a good tactical trading opportunity is nearing to start buying the dips in 30y Treasuries at 3% and scale in on towards 3.2%

20161115-TYX.png

 

 

Daily Market Snapshot

Sector ETFs by Daily Return %

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
KRE SPDR KBW Regional Banking ETF 50.83  

1.34

2.67%

2.71% 16.08%
XLF SPDR Select Sector Fund – Financial 22.2  

0.53

2.42%

2.45% 12.46%
XLFS S&P SmallCap Financials Portfolio 34.97  

0.75

2.17%

2.19% 12.30%
XRT SPDR S&P Retail ETF 45.26  

0.85

1.90%

1.91% 7.17%
IBB iShares Nasdaq Biotechnology 293.09  

5.09

1.75%

1.77% 14.18%
IYR iShares Dow Jones U.S. Real Estate Index Fund 74.5  

1.24

1.68%

1.69% -2.79%
IWM iShares Russell 2000 129.15  

1.79

1.40%

1.41% 8.99%
XLE SPDR Select Sector Fund – Energy Select Sector 69.85  

0.39

0.56%

0.56% 1.79%
XLI SPDR Select Sector Fund – Industrial 61.31  

0.26

0.42%

0.43% 7.17%
XLB Materials Select Sector SPDR 48.26  

0.11

0.23%

0.23% 3.23%
DIA Dow Jones Industrial Average ETF 188.77  

0.3

0.16%

0.16% 4.19%
SPY SPDR S&P 500 216.59  

0.17

0.08%

0.08% 1.90%
XLY SPDR Select Sector Fund – Consumer Discretionary 79.73  

0.01

0.01%

0.01% 2.09%
XLU SPDR Select Sector Fund – Utilities 46  

-0.03

-0.07%

-0.07% -6.94%
XLP SPDR Select Sector Fund – Consumer Staples 50.45  

-0.09

-0.18%

-0.18% -4.45%
XLV SPDR Select Sector Fund – Health Care 70.27  

-0.22

-0.31%

-0.31% 4.32%
XLG Rydex Russell Top 50 ETF 151.46  

-0.71

-0.47%

-0.47% 0.95%
QQQ PowerShares QQQ Trust 114.63  

-1.17

-1.02%

-1.01% -2.02%
SMH HOLDRS Merrill Lynch Semiconductor 67.82  

-0.74

-1.09%

-1.08% -0.66%
PFF iShares S&P US Preferred Stock Fund 36.78  

-0.56

-1.51%

-1.50% -5.57%
XLK SPDR Select Sector Fund – Technology 46.02  

-0.71

-1.53%

-1.52% -2.95%

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) WTD % MTD %
USO United States Oil Fund 9.87  

0.1

1.02%

1.02% -6.27%
GDX Market Vectors TR Gold Miners 21.12  

0.2

0.95%

0.96% -13.87%
HYG iShares iBoxx $ HY Corp Bond Fund 84.09  

0.62

0.74%

0.74% -2.24%
AGG iShares Barclays Aggregate Bond Fund 108.81  

-0.44

-0.40%

-0.40% -2.24%
LQD iBoxx $ Investment Grade Corporate Bond Fund 117.47  

-0.61

-0.52%

-0.52% -2.90%
DBA PowerShares DB Agriculture Fund 20.06  

-0.12

-0.60%

-0.59% -2.24%
TLT iShares Barclays 20 Year Treasury Bond Fund 121.31  

-0.73

-0.60%

-0.60% -7.57%
GLD SPDR Gold Trust 116.11  

-0.99

-0.85%

-0.85% -4.78%
SLV iShares Silver Trust 16  

-0.47

-2.90%

-2.85% -5.72%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
EWM iShares MSCI Malaysia Index Fund 29.68  

1.11

3.81%

3.89% 271.93%
DXJ WisdomTree Japan Total Dividend Fund 46.54  

1.01

2.19%

2.22% 3.08%
EWW iShares MSCI Mexico Index Fund 44.12  

0.78

1.78%

1.80% -13.20%
EWA iShares MSCI Australia Index Fund 20.48  

0.05

0.24%

0.24% 0.99%
EWC iShares MSCI Canada Index Fund 24.89  

0.04

0.16%

0.16% -1.81%
EWJ iShares MSCI Japan Index Fund 49.56  

0.06

0.12%

0.12% 292.40%
EWZ iShares MSCI Brazil Index Fund 32.38  

-0.12

-0.37%

-0.37% -14.25%
EWX SPDR S&P Emerging Markets Small Cap ETF 40.04  

-0.17

-0.42%

-0.42% -6.88%
EWU iShares MSCI United Kingdom Index Fund 29.96  

-0.14

-0.47%

-0.47% 99.73%
FXI iShares FTSE/Xinhua China 25 Index Fund 35.76  

-0.22

-0.61%

-0.61% -2.98%
EWQ iShares MSCI France Index Fund 23.47  

-0.15

-0.64%

-0.64% -2.41%
EWN iShares MSCI Netherlands Index Fund 23.62  

-0.16

-0.68%

-0.67% -3.51%
EEM iShares MSCI Emerging Index Fund 34.3  

-0.25

-0.73%

-0.72% -7.65%
EWS iShares MSCI Singapore Index Fund 20.21  

-0.15

-0.74%

-0.74% 95.27%
EWO iShares MSCI Austria Index Fund 16.2  

-0.13

-0.80%

-0.80% -1.46%
EWT iShares MSCI Taiwan Index Fund 29.46  

-0.29

-0.98%

-0.97% 86.93%
EWG iShares MSCI Germany Index Fund 25.24  

-0.25

-0.99%

-0.98% -2.59%
EWY iShares MSCI South Korea Index Fund 52.33  

-0.52

-0.99%

-0.98% -5.46%
EWL iShares MSCI Switzerland Index Fund 28.89  

-0.29

-1%

-0.99% -0.41%
EWH iShares MSCI Hong Kong Index Fund 20.59  

-0.22

-1.06%

-1.06% -4.54%
EWP iShares MSCI Spain Index Fund 25.5  

-0.35

-1.36%

-1.35% -7.10%
EWK iShares MSCI Belgium Index Fund 17.1  

-0.28

-1.62%

-1.61% -4.47%
EWD iShares MSCI Sweden Index Fund 27.03  

-0.48

-1.76%

-1.74% -1.85%
EWI iShares MSCI Italy Index Fund 21.69  

-0.4

-1.83%

-1.81% 92.29%

Week Ahead – Events and Economic Data

11/15 Tuesday

Time Event / Data
08:30 Retail Sales
13:30 FOMC Member Fisher Speaks

 

11/16 Wednesday

Time Event / Data
08:30 PPI
09:15 Industrial Production
10:30 Crude Oil Inventories

 

11/17 Thursday

Time Event / Data
08:30 Initial Claims, CPI
10:00 Fed Chair Yellen Testifies
12:30 FOMC Member Brainard Speaks

 

11/18 Friday

Time Event / Data
03:00 ECB President Draghi Speaks
09:30 FOMC Member George Speaks
13:00 FOMC Member Kaplan Speaks
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