Macro Market · Market Commentary · Newsletter

Weekly Commentary – Digesting the Rally

Hope those in the US had a fantastic Thanksgiving holiday. The US markets certainly had a festive week with all 4 trading days in the green, though obviously on light volume given the holiday schedule. Whether this breakout has conviction hinges on if there is follow-through this coming week. Technically, the Dow did cleanly broke through the ascending wedge while the SPX is inching closer to the top of its own.

20161128-indu20161128-spx

Leading the charge last week was the retail sector (XRT), which surged almost 3% on optimism of a strong retail season. However, those hopes were dashed over the weekend, as per Reuters, “ales and traffic at U.S. brick-and-mortar stores on Thanksgiving Day and Black Friday declined from last year, as stores offered discounts well beyond the weekend and more customers shopped online.” As a result, the retail sector most likely will give back some of the monstrous gains, but more important is whether it can hold the breakout area around 46 area.

https://ca.news.yahoo.com/u-thanksgiving-black-friday-store-sales-fall-online-042553829.html

20161128-XRT.png

The skyrocketing Russell 2000 (IWM) still shows no sign of gravity and notched another high at 134. With LT trendline resistance ahead, we are in the camp that IWM will consolidate and digest the recent gains.

20161128-IWM.png

Catalytically, the vote recount request in Wisconsin which is endorsed by Clinton over the weekend has already caused jitters in the futures and FX market, notably with the US Dollar Index (DXY) gapping down to just under the 101 handle as we write around 2am EST. It will most likely prove to be smoke in the mirrors, as “the number of votes separating Mr Trump and Mrs Clinton in the closest of the three states  - Michigan -  ”well exceeds the largest margin ever overcome in a recount”

http://www.bbc.com/news/world-us-canada-38118852

Nonetheless, the noise was enough to cause a partial unwind of the furious rally in USD, as the 4 hour chart finally broke the uptrend off Election night lows. Furthermore, it is in the process of forming a H&S pattern with the neckline at overnight lows. We expect that to be broken and ultimately filling gap just above 99 in coming weeks.

20161128-DXY.png

The retracement in USD would most certainly point to a relief rally in the Yen and Gold, which have moved almost synchronously as both plunged to the bottom of their respective down channel. For the Yen ETF (FXY), the ST bounce target is at the 50WMA at 89, about 5% from the current price point of 85.21.

20161127-FXY.png

Similarly for the shiny metal, a relief bounce will likely retest the 1200 handle as well as the broken neckline around 1220. We expect Gold to chop between 1170 and 1220 until after the Fed meeting which the market is pricing in virtually a 100% chance of a rate hike.

20161127-GOLD.png

Meanwhile, Crude Oil continues chopping between 43-49 thanks to the ongoing OPEC drama and closed right at the mid point. Production cut or not? That is what market has been speculating but turned skeptical after “Saudi Arabia’s officials cancelled a meeting with non-OPEC members which had been due to take place on Monday.”

http://www.telegraph.co.uk/business/2016/11/27/opec-may-finally-cut-production-bolster-oil-prices/

With the outcome to be revealed on Wednesday’s OPEC meeting, which happens to be the end of the month, it will have major implication on the monthly chart of Crude Oil. A close above 50 would negate the bearish shooting star candle formed last month and points to 60 as next target. On the other hand, closing under 47 would ensure further negative momentum into end of year.

20161128-CL.png

Despite the indecisive trading in Crude Oil, the Energy sector (XLE) has been resilient and broke through the key multi-month up channel on the weekly chart, suggesting further upside momentum towards the 200WMA area:

20161128-XLE.png

In the next couple of days, we will review and discuss the monthly charts of major asset classes and share our outlook and trading strategies heading into 2017.

 

Weekly Market Snapshot

Sector ETFs by Weekly Return %

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
XRT SPDR S&P Retail ETF 46.64  

-0.19

-0.41%

2.94% 10.44%
XLB Materials Select Sector SPDR 49.56  

0.15

0.30%

2.57% 6.01%
IWM iShares Russell 2000 134.07  

0.44

0.33%

2.35% 13.14%
XLI SPDR Select Sector Fund – Industrial 62.71  

0.34

0.54%

2.30% 9.61%
XLE SPDR Select Sector Fund – Energy Select Sector 72.72  

-0.36

-0.49%

2.24% 5.97%
XLY SPDR Select Sector Fund – Consumer Discretionary 82.98  

0.2

0.24%

2.19% 6.25%
SMH HOLDRS Merrill Lynch Semiconductor 71.71  

0.21

0.29%

1.96% 5.04%
XLU SPDR Select Sector Fund – Utilities 47.16  

0.67

1.43%

1.88% -4.59%
IYR iShares Dow Jones U.S. Real Estate Index Fund 74.92  

0.38

0.51%

1.68% -2.24%
KRE SPDR KBW Regional Banking ETF 52.3  

0

0%

1.55% 19.43%
DIA Dow Jones Industrial Average ETF 191.3  

0.71

0.37%

1.51% 5.59%
XLP SPDR Select Sector Fund – Consumer Staples 51.22  

0.4

0.78%

1.43% -2.99%
SPY SPDR S&P 500 221.52  

0.82

0.37%

1.38% 4.22%
PFF iShares S&P US Preferred Stock Fund 37.67  

0.08

0.21%

1.37% -3.29%
XLK SPDR Select Sector Fund – Technology 48  

0.2

0.42%

1.35% 1.22%
QQQ PowerShares QQQ Trust 118.8  

0.38

0.32%

1.26% 1.55%
XLG Rydex Russell Top 50 ETF 154.7  

0.65

0.42%

1.20% 3.11%
XLF SPDR Select Sector Fund – Financial 22.41  

0.03

0.13%

1.13% 13.53%
IBB iShares Nasdaq Biotechnology 284.46  

0.72

0.25%

-0.09% 10.82%
XLV SPDR Select Sector Fund – Health Care 69.48  

0.27

0.39%

-0.32% 3.15%
           

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) WTD % MTD %
HYG iShares iBoxx $ HY Corp Bond Fund 85.73  

0.11

0.13%

1.30% -0.34%
DBA PowerShares DB Agriculture Fund 20.3  

0.02

0.10%

0.69% -1.07%
USO United States Oil Fund 10.33  

-0.34

-3.24%

0.10% -1.90%
LQD iBoxx $ Investment Grade Corporate Bond Fund 116.59  

0.01

0.01%

0% -3.63%
TLT iShares Barclays 20 Year Treasury Bond Fund 120.82  

0.18

0.15%

-0.02% -7.95%
AGG iShares Barclays Aggregate Bond Fund 108.17  

-0.01

-0.01%

-0.18% -2.81%
SLV iShares Silver Trust 15.63  

0.11

0.71%

-0.64% -7.90%
GDX Market Vectors TR Gold Miners 20.61  

0.11

0.54%

-2.09% -15.95%
GLD SPDR Gold Trust 112.61  

-0.64

-0.57%

-2.21% -7.65%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
EWA iShares MSCI Australia Index Fund 20.83  

0.22

1.06%

3.99% 2.71%
FXI iShares FTSE/Xinhua China 25 Index Fund 37.09  

0.35

0.95%

3.20% 0.62%
EWW iShares MSCI Mexico Index Fund 44.08  

0.41

0.93%

2.58% -13.28%
EWT iShares MSCI Taiwan Index Fund 30.7  

0.2

0.65%

2.54% 94.80%
EWY iShares MSCI South Korea Index Fund 53.03  

0.23

0.43%

2.08% -4.19%
EWK iShares MSCI Belgium Index Fund 17.22  

0.21

1.23%

2.07% -3.80%
EWU iShares MSCI United Kingdom Index Fund 30.29  

0.13

0.43%

2.06% 101.93%
EWI iShares MSCI Italy Index Fund 21.29  

0.02

0.09%

2.01% 88.74%
EEM iShares MSCI Emerging Index Fund 35.25  

0.17

0.48%

1.91% -5.09%
DXJ WisdomTree Japan Total Dividend Fund 48.15  

-0.25

-0.52%

1.82% 6.64%
EWC iShares MSCI Canada Index Fund 25.88  

-0.05

-0.19%

1.65% 2.09%
EWZ iShares MSCI Brazil Index Fund 33.06  

-0.75

-2.24%

1.44% -12.45%
EWS iShares MSCI Singapore Index Fund 20.87  

0.35

1.69%

1.36% 101.64%
EWD iShares MSCI Sweden Index Fund 27.66  

0.21

0.76%

1.28% 0.44%
EWX SPDR S&P Emerging Markets Small Cap ETF 40.87  

0.2

0.49%

1.26% -4.95%
EWN iShares MSCI Netherlands Index Fund 23.7  

0.18

0.76%

1.11% -3.19%
EWO iShares MSCI Austria Index Fund 16.08  

0.04

0.25%

1.07% -2.19%
EWH iShares MSCI Hong Kong Index Fund 20.99  

0.05

0.24%

1.06% -2.69%
EWQ iShares MSCI France Index Fund 23.37  

0.16

0.69%

0.95% -2.83%
EWG iShares MSCI Germany Index Fund 24.97  

0.16

0.64%

0.44% -3.63%
EWP iShares MSCI Spain Index Fund 25.18  

0.11

0.44%

0.44% -8.27%
EWJ iShares MSCI Japan Index Fund 49.49  

-0.42

-0.85%

0.20% 291.84%
EWL iShares MSCI Switzerland Index Fund 28.5  

0.45

1.59%

-0.45% -1.76%
EWM iShares MSCI Malaysia Index Fund 29.44  

0.04

0.14%

-0.47% 268.92%

 

 

Week Ahead – Events and Economic Data

11/28 Monday

Time Event / Data
09:00 ECB President Draghi Speaks

 

11/29 Tuesday

Time Event / Data
08:30 US GDP
09:15 FOMC Member Dudley Speaks
10:00 Consumer Confidence

 

11/30 Wednesday

Time Event / Data
TBD OPEC Meeting
09:45 Chicago PMI
10:00 Pending Home Sales
10:30 Crude Oil Inventories
14:00 Beige Book

 

12/1 Thursday

Time Event / Data
08:30 Initial Jobless Claims
10:00 ISM Manufacturing

 

12/2 Friday

Time Event / Data
08:30 NFP & Unemployment Rate
10:00 ISM Manufacturing

 

 

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