Macro Market · Market Commentary · Newsletter

Daily Commentary – Santa Claus Rally

US stock markets kick-started Thanksgiving holiday week with celebration of fresh ATHs in the SPX, which jumped 16pts to close above previously broken uptrend line and confirmed a strong technical breakout. Meanwhile the Dow, which led the way since the Election, was up 88pts but remain capped at the top of ascending wedge. The convergence between SPX and Dow most likely continues until SPX charges towards top of its own ascending wedge.

20161122-SPX.png

20161122-INDU.png

Not only are technicals pointing to further upside in SPX, but positive seasonality will most likely help underpin the ongoing rally in the stock market. Specifically, we are in the midst of the so-called Santy Claus rally, which typically starts from middle of November until Christmas and historically have a high tendency of positive returns. Looking back since 2000, from the 15th trading day of November, SPX is up more than 80% of the time in the next 10 and 20 trading days with an average 2.2% and 1.4% gain respectively:

Starting Date SPX Next 5-Day Return Next 10-Day Return Next 20-Day Return
2016/11/21 2198 ? ? ?
2015/11/20 2089 -0.4% -0.6% -3.3%
2014/11/21 2064 -0.5% -0.2% 0.7%
2013/11/21 1796 0.6% 0.5% 1.2%
2012/11/21 1391 1.8% 1.6% 3.7%
2011/11/21 1193 0.2% 5.3% 4.0%
2010/11/19 1200 -1.0% 1.9% 3.9%
2009/11/20 1091 0.4% 1.1% 2.1%
2008/11/21 800 2.0% 12.8% 8.6%
2007/11/21 1417 3.7% 6.2% 3.0%
2006/11/21 1403 -0.2% 0.7% 1.5%
2005/11/21 1255 0.2% 0.7% 0.4%
2004/11/19 1170 0.7% 1.7% 2.1%
2003/11/21 1035 3.3% 3.2% 5.4%
2002/11/21 934 0.3% -2.3% -4.2%
2001/11/21 1137 0.3% 2.6% 0.3%
2000/11/21 1347 -0.4% 0.3% -6.3%
Average 0.7% 2.2% 1.4%
% Positive 69% 81% 81%

As shown above, almost every year we have seen SPX heading into Christmas in the green. Last year was a notable exception during which the markets were uneased by the sharp drop in crude oil prices, while late 2000 marked the beginning of the end of the dot-com bubble. A case could certainly be made we could have another exception year given the uncertainties surrounding the Trump presidency, though odds are in bulls’ favor given the strong technicals in the SPX. 2220 would the ST upside target after the fresh breakout.

The top performing sector which helped lifting SPX for the past week was Energy (XLE) thanks to the resurgence of crude oil, which was up more than 4% “bolstered by growing conviction that major oil producing countries would agree to limit output at a meeting next week.”

http://www.cnbc.com/2016/11/20/oil-prices-climb-on-expectation-of-opec-led-output-cut.html

Technically, the XLE propelled right up to the top of ascending channel for the 4th time since August, and it will be interesting if we fail and drop back towards the bottom or finally breakout to the upside, which would certainly bolster the SPX further.

20161122-XLE.png

If there was any sign of imminent correction, it would be the Russell 2000 (IWM) that is likely to give us the signal, as the historically overbought index was up another 0.5% with the RSI at extreme levels which usually followed with retracements. The IWM also retested previously broken LT trendline at 132 and most likely a tough hurdle in the short-term.

20161122-IWM.png

With low volume during the holiday period, we expect slow grind up into Thanksgiving and any major action will most likely not return until next week.

Daily Market Snapshot

Sector ETFs by Daily Return %

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
XLE SPDR Select Sector Fund – Energy Select Sector 72.82  

1.69

2.35%

2.38% 6.12%
XLB Materials Select Sector SPDR 48.89  

0.57

1.17%

1.18% 4.58%
XLU SPDR Select Sector Fund – Utilities 46.78  

0.49

1.05%

1.06% -5.36%
QQQ PowerShares QQQ Trust 118.54  

1.22

1.03%

1.04% 1.32%
XLK SPDR Select Sector Fund – Technology 47.84  

0.48

1.01%

1.01% 0.89%
SPY SPDR S&P 500 220.15  

1.65

0.75%

0.76% 3.58%
XLG Rydex Russell Top 50 ETF 153.98  

1.11

0.72%

0.73% 2.63%
IBB iShares Nasdaq Biotechnology 286.71  

1.99

0.70%

0.70% 11.70%
XLP SPDR Select Sector Fund – Consumer Staples 50.84  

0.34

0.67%

0.67% -3.71%
SMH HOLDRS Merrill Lynch Semiconductor 70.79  

0.46

0.65%

0.65% 3.69%
XLY SPDR Select Sector Fund – Consumer Discretionary 81.73  

0.53

0.65%

0.65% 4.65%
PFF iShares S&P US Preferred Stock Fund 37.4  

0.24

0.64%

0.65% -3.98%
XLI SPDR Select Sector Fund – Industrial 61.63  

0.33

0.54%

0.54% 7.73%
XRT SPDR S&P Retail ETF 45.54  

0.23

0.51%

0.51% 7.84%
DIA Dow Jones Industrial Average ETF 189.34  

0.88

0.47%

0.47% 4.51%
IWM iShares Russell 2000 131.6  

0.61

0.46%

0.47% 11.05%
XLF SPDR Select Sector Fund – Financial 22.24  

0.08

0.36%

0.36% 12.66%
XLV SPDR Select Sector Fund – Health Care 69.95  

0.25

0.36%

0.36% 3.85%
KRE SPDR KBW Regional Banking ETF 51.66  

0.16

0.31%

0.31% 17.97%
IYR iShares Dow Jones U.S. Real Estate Index Fund 73.69  

0.01

0.01%

0.01% -3.85%
           

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) WTD % MTD %
USO United States Oil Fund 10.77  

0.45

4.27%

4.36% 2.28%
GDX Market Vectors TR Gold Miners 21.48  

0.43

2.02%

2.04% -12.40%
DBA PowerShares DB Agriculture Fund 20.34  

0.18

0.89%

0.89% -0.88%
HYG iShares iBoxx $ HY Corp Bond Fund 85.31  

0.68

0.80%

0.80% -0.83%
GLD SPDR Gold Trust 115.58  

0.43

0.37%

0.37% -5.22%
TLT iShares Barclays 20 Year Treasury Bond Fund 121.15  

0.3

0.25%

0.25% -7.70%
LQD iBoxx $ Investment Grade Corporate Bond Fund 116.71  

0.12

0.10%

0.10% -3.53%
AGG iShares Barclays Aggregate Bond Fund 108.46  

0.09

0.08%

0.08% -2.55%
SLV iShares Silver Trust 15.72  

-0.01

-0.06%

-0.06% -7.37%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
EWZ iShares MSCI Brazil Index Fund 33.75  

1.16

3.50%

3.56% -10.62%
EWC iShares MSCI Canada Index Fund 25.98  

0.52

2.02%

2.04% 2.49%
EWW iShares MSCI Mexico Index Fund 43.61  

0.64

1.48%

1.49% -14.20%
EWU iShares MSCI United Kingdom Index Fund 30.08  

0.4

1.34%

1.35% 100.53%
EWQ iShares MSCI France Index Fund 23.42  

0.27

1.16%

1.17% -2.62%
EWT iShares MSCI Taiwan Index Fund 30.26  

0.32

1.06%

1.07% 92.01%
EWI iShares MSCI Italy Index Fund 21.09  

0.22

1.05%

1.05% 86.97%
EWD iShares MSCI Sweden Index Fund 27.59  

0.28

1.02%

1.03% 0.18%
EEM iShares MSCI Emerging Index Fund 34.93  

0.34

0.98%

0.98% -5.95%
EWK iShares MSCI Belgium Index Fund 17.03  

0.16

0.94%

0.95% -4.86%
EWN iShares MSCI Netherlands Index Fund 23.65  

0.21

0.89%

0.90% -3.39%
EWA iShares MSCI Australia Index Fund 20.2  

0.17

0.85%

0.85% -0.39%
EWM iShares MSCI Malaysia Index Fund 29.83  

0.25

0.84%

0.85% 273.81%
FXI iShares FTSE/Xinhua China 25 Index Fund 36.24  

0.3

0.83%

0.83% -1.68%
DXJ WisdomTree Japan Total Dividend Fund 47.68  

0.39

0.82%

0.82% 5.60%
EWJ iShares MSCI Japan Index Fund 49.79  

0.4

0.81%

0.81% 294.22%
EWX SPDR S&P Emerging Markets Small Cap ETF 40.63  

0.27

0.67%

0.67% -5.51%
EWG iShares MSCI Germany Index Fund 25.02  

0.16

0.64%

0.64% -3.43%
EWP iShares MSCI Spain Index Fund 25.23  

0.16

0.64%

0.64% -8.09%
EWO iShares MSCI Austria Index Fund 16.01  

0.1

0.63%

0.63% -2.62%
EWH iShares MSCI Hong Kong Index Fund 20.86  

0.09

0.43%

0.43% -3.29%
EWY iShares MSCI South Korea Index Fund 52.16  

0.21

0.40%

0.40% -5.76%
EWS iShares MSCI Singapore Index Fund 20.61  

0.02

0.10%

0.10% 99.13%
EWL iShares MSCI Switzerland Index Fund 28.56  

-0.07

-0.24%

-0.24% -1.55%

 

 

Week Ahead – Events and Economic Data

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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