Macro Market · Market Commentary · Portfolio Update

Weekly Commentary – The King Dollar

A follow-through week for US equities after the historic Trump victory, led by the Nasdaq and the SPX which played catch-up to the Dow with a rise of 1.2% and 0.8% respectively. Technically, SPX remains bounded by previous ATHs as well as the broken LT uptrend while the Dow consolidated at the top of the ascending wedge.

20161120-SPX.png

20161120-DJIA.png

Meanwhile, the top performers since the Election – Russell 2000 (IWM) and financial sector (XLF) remain on fire which were both up by more than 2%, and particularly the regional banks (KRE) boosted another 4%. In the weekly charts, however, strong resistance looms in both XLF and IWM as they are about to hit their respective LT broken trendlines which along with extremely overstretched conditions could finally cool down the “Trump Trade” leaders at least in the near-term.

20161120-XLF.png

20161120-IWM.png

Away from the equity markets, it was the “King” Dollar  who stole the show which made new 13-year highs, as the DXY (US Dollar Index) jumped more than 2% higher to close decisively above the weekly descending channel which we have highlighted previously.

20161120-DXY.png

From a momentum perspective, the bullish breakout undoubtedly points to further gains. However, looking at the monthly-chart, a contrarian case could also be made that it is resembling the topping pattern during 2000-2002 with 3 higher highs made on declining RSI. Whether the same pattern plays out would depend on December’s price action, so it will be an exciting end of the year to continue keeping track of the US Dollar.

20161118-DXY.png

Behind the US Dollar’s moonshot is the Euro’s collapse, as the EUR/USD closed red 10-days in a row for the first time since September 2008, and in fact only the 2nd time since 2000.

20161120-EURUSDStreak.png

Looking back in the 2008 occurrence, the EUR/USD proceeded to extend the losing streak to 11 days, after which it finally made a furious oversold bounce before plunging to lower lows. Should a similar scenario play out, we could possibly see parity in EUR/USD before the end of the year.

20161120-EURUSDStreak2008.png

There are no short of analysts on the street forecasting EUR/USD to fall towards parity, such as Deutsche Bank who believes that “European risks are tilted to the downside given a deteriorating credit impulse and political outlook.” and “The recent rise in European real rates increases the odds of a more dovish ECB” would be catalysts to a lower EUR/USD.

https://www.poundsterlinglive.com/eurusd/5741-deutsche-bank-see-eur-usd-falling-to-parity

The Yen also endured a free fall alongside the Euro, as the USD/JPY reclaimed the 110 handle and about 50% retracement of the YTD move. In the monthly chart, a very large symmetric inverse H&S pattern is in the works after holding the 100 shoulder line and is now closing in on the intermediate resistance line at 112, which served as pivot between 2004-2008. Given the symmetric pattern continue to play out, we likely chop sideways between 105 and 112 in the next few months before resolving to the upside towards the 2015 high and neckline area at 125.

20161120-USDJPY.png

The commodity arguably most negatively correlated to the US Dollar is Gold, as it confirmed a breakdown last week through H&S pattern and further downside to the right shoulder line of a larger inverse H&S pattern near 1170 area is the most likely outcome. The bigger multi-year technical picture suggests a large trading range between 1170 and 1350 with bullish bias of a breakout above the 1350 neckline eventually.

20161121-GOLD.png

Absent any surprises, next week will be a quiet, light volume week with Thanksgiving holiday on Thursday in the US. FOMC minutes on Wednesday will be watched but unlikely to be trend altering event.

Weekly Market Snapshot

Sector ETFs by Weekly Return %

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
KRE SPDR KBW Regional Banking ETF 51.5  

0.35

0.68%

4.06% 17.61%
IWM iShares Russell 2000 130.99  

0.69

0.53%

2.85% 10.54%
SMH HOLDRS Merrill Lynch Semiconductor 70.33  

0.4

0.57%

2.58% 3.02%
XLE SPDR Select Sector Fund – Energy Select Sector 71.13  

0.29

0.41%

2.40% 3.66%
XLF SPDR Select Sector Fund – Financial 22.16  

0

0%

2.26% 12.26%
XRT SPDR S&P Retail ETF 45.31  

-0.43

-0.94%

2.03% 7.29%
XLY SPDR Select Sector Fund – Consumer Discretionary 81.2  

-0.25

-0.31%

1.86% 3.97%
XLK SPDR Select Sector Fund – Technology 47.36  

-0.04

-0.08%

1.35% -0.13%
QQQ PowerShares QQQ Trust 117.32  

-0.44

-0.37%

1.31% 0.28%
SPY SPDR S&P 500 218.5  

-0.49

-0.22%

0.96% 2.80%
IYR iShares Dow Jones U.S. Real Estate Index Fund 73.68  

0.22

0.30%

0.57% -3.86%
XLU SPDR Select Sector Fund – Utilities 46.29  

-0.14

-0.30%

0.56% -6.35%
XLG Rydex Russell Top 50 ETF 152.87  

-0.46

-0.30%

0.46% 1.89%
XLI SPDR Select Sector Fund – Industrial 61.3  

-0.02

-0.03%

0.41% 7.15%
XLB Materials Select Sector SPDR 48.32  

-0.07

-0.14%

0.35% 3.36%
DIA Dow Jones Industrial Average ETF 188.46  

-0.31

-0.16%

-0.01% 4.02%
XLP SPDR Select Sector Fund – Consumer Staples 50.5  

-0.18

-0.36%

-0.08% -4.36%
PFF iShares S&P US Preferred Stock Fund 37.16  

-0.32

-0.86%

-0.48% -4.60%
XLV SPDR Select Sector Fund – Health Care 69.7  

-0.75

-1.07%

-1.12% 3.47%
IBB iShares Nasdaq Biotechnology 284.72  

3.8

-1.33%

-1.14% 10.92%
 

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) WTD % MTD %
USO United States Oil Fund 10.32  

0.19

1.86%

5.63% -1.99%
HYG iShares iBoxx $ HY Corp Bond Fund 84.63  

0

0%

1.39% -1.62%
GDX Market Vectors TR Gold Miners 21.05  

-0.25

-1.18%

0.62% -14.15%
DBA PowerShares DB Agriculture Fund 20.16  

0.03

0.15%

-0.10% -1.75%
AGG iShares Barclays Aggregate Bond Fund 108.37  

-0.35

-0.32%

-0.81% -2.63%
TLT iShares Barclays 20 Year Treasury Bond Fund 120.85  

-0.35

-0.29%

-0.98% -7.92%
LQD iBoxx $ Investment Grade Corporate Bond Fund 116.59  

-0.66

-0.56%

-1.26% -3.63%
GLD SPDR Gold Trust 115.15  

-1.02

-0.88%

-1.67% -5.57%
SLV iShares Silver Trust 15.73  

-0.11

-0.70%

-4.49% -7.31%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
DXJ WisdomTree Japan Total Dividend Fund 47.29  

-0.35

-0.74%

3.87% 4.74%
EWM iShares MSCI Malaysia Index Fund 29.58  

-0.18

-0.61%

3.54% 270.68%
EWC iShares MSCI Canada Index Fund 25.46  

0.04

0.16%

2.45% 0.43%
EWS iShares MSCI Singapore Index Fund 20.59  

0.09

0.44%

1.13% 98.94%
EWT iShares MSCI Taiwan Index Fund 29.94  

-0.1

-0.33%

0.64% 89.97%
EWX SPDR S&P Emerging Markets Small Cap ETF 40.36  

-0.04

-0.10%

0.37% -6.14%
EWZ iShares MSCI Brazil Index Fund 32.59  

0.21

0.65%

0.28% -13.69%
EEM iShares MSCI Emerging Index Fund 34.59  

-0.16

-0.46%

0.12% -6.87%
FXI iShares FTSE/Xinhua China 25 Index Fund 35.94  

-0.03

-0.08%

-0.11% -2.50%
EWH iShares MSCI Hong Kong Index Fund 20.77  

0.06

0.29%

-0.19% -3.71%
EWJ iShares MSCI Japan Index Fund 49.39  

-0.75

-1.51%

-0.22% 291.05%
EWD iShares MSCI Sweden Index Fund 27.31  

-0.07

-0.26%

-0.73% -0.84%
EWW iShares MSCI Mexico Index Fund 42.97  

-1.24

-2.84%

-0.85% -15.46%
EWU iShares MSCI United Kingdom Index Fund 29.68  

-0.32

-1.07%

-1.40% 97.87%
EWN iShares MSCI Netherlands Index Fund 23.44  

-0.17

-0.72%

-1.43% -4.25%
EWY iShares MSCI South Korea Index Fund 51.95  

-0.44

-0.84%

-1.70% -6.14%
EWL iShares MSCI Switzerland Index Fund 28.63  

-0.3

-1.04%

-1.88% -1.31%
EWA iShares MSCI Australia Index Fund 20.03  

-0.17

-0.85%

-1.96% -1.23%
EWQ iShares MSCI France Index Fund 23.15  

-0.23

-0.99%

-1.99% -3.74%
EWG iShares MSCI Germany Index Fund 24.86  

-0.23

-0.92%

-2.47% -4.05%
EWO iShares MSCI Austria Index Fund 15.91  

-0.1

-0.63%

-2.57% -3.22%
EWK iShares MSCI Belgium Index Fund 16.87  

-0.21

-1.24%

-2.93% -5.75%
EWP iShares MSCI Spain Index Fund 25.07  

-0.42

-1.66%

-3.02% -8.67%
EWI iShares MSCI Italy Index Fund 20.87  

-0.53

-2.51%

-5.52% 85.02%

 

 

Week Ahead – Events and Economic Data

11/21 Monday

Time Event / Data
08:00 FOMC Member Stanley Fischer Speaks

 

11/22 Tuesday

Time Event / Data
10:00 Existing Home Sales

 

11/23 Wednesday

Time Event / Data
08:30 Durable Goods, Initial Jobless Claims
10:00 Michigan Consumer Sentiment, New Home Sales
10:30 Crude Oil Inventories
14:00 FOMC Minutes

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