Macro Market · Market Commentary · Newsletter

Daily Commentary – Another Early Xmas Present

Boom. An explosive move to the upside for US equity markets with the SPX up the most (+1.3%) since the beginning of the Trump Rally, and fresh new ATHs with the Dow less than 500pts away from 20000. Notably, the SPX converged with the Dow to break above ascending wedge and is now in escape velocity.

20161208-SPX.png

No particular fundamental catalyst as per the WSJ it was rather a technical move due to “large orders in stock futures placed by computer programs accelerated buying broadly.” Perhaps it was a short squeeze, or computer programs giving investors another early Xmas gift.

http://www.wsj.com/articles/banks-lead-shares-higher-1481100432

One notable divergence comparing with the early stage of the Trump Rally is the lack of up move in the US Dollar nor the Treasury yields, as the DXY and 30y yield were down -0.26 and 5bps respectively. The technical pictures for both continue to suggest further retracement in the short-term as illustrated in recent editions.

The lone sectors that were in the red today were the Health Care (XLV) and Biotechs (IBB), down -0.9% and -3% respectively, due to President-elect Trump’s pledge to “bring down drug prices” per his “Person of the Year” interview with the Times.

http://time.com/time-person-of-the-year-2016-donald-trump/?iid=buttonrecirc

Technically, IBB filled the gap left open post-Election though not necessarily bearish if it can rally off the gap fill. But the picture will tilt to the negative side quickly if a 50-200DMA death cross was to occur.

20161208-IBB.png

Aside from that, all other sectors rallied broadly with Technology, Consumer Discretionary, Retail, REITs, Financials all up more than 1.5%. For the XLF, with it so ever overbought, it’s perhaps more appropriate to analyze it from a statistical point of view rather than conventional technical analysis. One statistical observation is that the XLF is now 22.4% higher than its 200DMA, and since 2000, the only other period XLF is >20% above its 200DMA is between Aug-Oct 2009:

20161208-XLF.png

Furthermore, when XLF rallied 20% above its 200DMA in August, it proceeded to rally another 10% and 13% respectively in the next 20 and 50 trading days. Another rally of that magnitude would mean surpassing the 2007 ATHs.

So how much more to go with this Santa Claus rally after a 2% MTD gain so far in the SPX? Looking back we noticed that the current rally since November 18th is pretty much in sync with post-Election cycles in 2000 and 2008. While the magnitude is very much different, the posture in terms of bottoming and peaking is very much similar as shown below:

20161208-SPXRoadmap.png

Should we continue to follow the roadmap from 2000 & 2008, the peak of 2016 will occur this week before new highs in January 2017. The Fed meeting next Wednesday could be one catalyst to see a temporary pullback into the New Year.

 

 

 

Daily Market Snapshot

Sector ETFs by Daily Return %

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
SMH HOLDRS Merrill Lynch Semiconductor 71.62  

1.4

1.97%

4.14% 0.79%
IYR iShares Dow Jones U.S. Real Estate Index Fund 76.99  

1.47

1.93%

3.41% 2.86%
XLY SPDR Select Sector Fund – Consumer Discretionary 84.12  

1.6

1.92%

3.29% 2.77%
XLK SPDR Select Sector Fund – Technology 48.18  

0.9

1.89%

3.19% 1.43%
XLI SPDR Select Sector Fund – Industrial 64.05  

1.17

1.84%

1.97% 2.63%
XRT SPDR S&P Retail ETF 47.5  

0.83

1.76%

4.14% 3.92%
XLF SPDR Select Sector Fund – Financial 23.48  

0.36

1.55%

3.66% 4.31%
DIA Dow Jones Industrial Average ETF 195.48  

2.99

1.54%

1.95% 2.13%
XLP SPDR Select Sector Fund – Consumer Staples 51.51  

0.73

1.43%

1.86% 1.84%
XLB Materials Select Sector SPDR 51.15  

0.72

1.42%

2.34% 2.42%
SPY SPDR S&P 500 224.6  

2.9

1.30%

2.24% 1.91%
XLU SPDR Select Sector Fund – Utilities 47.38  

0.61

1.30%

1.24% 1.35%
QQQ PowerShares QQQ Trust 118.36  

1.49

1.27%

2.33% 0.72%
XLG Rydex Russell Top 50 ETF 156.47  

1.9

1.22%

2.25% 1.61%
KRE SPDR KBW Regional Banking ETF 55.04  

0.54

0.99%

3.79% 5.02%
IWM iShares Russell 2000 135.9  

1.31

0.97%

3.82% 3.26%
XLE SPDR Select Sector Fund – Energy Select Sector 75.95  

0.6

0.79%

1.50% 2.04%
PFF iShares S&P US Preferred Stock Fund 37.23  

0.08

0.22%

0.57% -0.67%
XLV SPDR Select Sector Fund – Health Care 67.89  

-0.59

-0.87%

-0.76% -1.25%
IBB iShares Nasdaq Biotechnology 266.28  

-8.06

-2.98%

-1.55% -2.84%
           

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) WTD % MTD %
SLV iShares Silver Trust 16.23  

0.38

2.37%

2.53% 3.64%
GDX Market Vectors TR Gold Miners 21.44  

0.24

1.13%

0.33% 2.93%
TLT iShares Barclays 20 Year Treasury Bond Fund 120.4  

1.02

0.85%

0.67% 0.13%
HYG iShares iBoxx $ HY Corp Bond Fund 86.46  

0.43

0.50%

1.26% 0.95%
LQD iBoxx $ Investment Grade Corporate Bond Fund 117.13  

0.49

0.42%

0.63% 0.25%
GLD SPDR Gold Trust 111.83  

0.4

0.36%

-0.28% 0.07%
AGG iShares Barclays Aggregate Bond Fund 108.37  

0.28

0.26%

0.32% 0.12%
DBA PowerShares DB Agriculture Fund 19.96  

0.05

0.25%

1.42% 0.10%
USO United States Oil Fund 11.09  

0.2

-1.79%

-3.40% 1.46%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
EWG iShares MSCI Germany Index Fund 26.16  

0.6

2.32%

5.74% 5.36%
EWI iShares MSCI Italy Index Fund 23.79  

0.54

2.30%

7.50% 9.38%
EWY iShares MSCI South Korea Index Fund 54.95  

1.16

2.13%

3.12% 3.17%
EWZ iShares MSCI Brazil Index Fund 33.28  

0.6

1.82%

5.05% -0.63%
EWQ iShares MSCI France Index Fund 24.63  

0.44

1.80%

5.30% 5.03%
EWD iShares MSCI Sweden Index Fund 28.65  

0.48

1.69%

4.41% 4.22%
EEM iShares MSCI Emerging Index Fund 36.2  

0.6

1.67%

3.08% 1.97%
EWO iShares MSCI Austria Index Fund 16.95  

0.26

1.55%

5.34% 5.38%
EWW iShares MSCI Mexico Index Fund 45  

0.66

1.48%

4.12% 1.99%
EWJ iShares MSCI Japan Index Fund 50.52  

0.74

1.48%

1.81% 1.26%
EWA iShares MSCI Australia Index Fund 21.04  

0.29

1.39%

1.69% 2.94%
EWU iShares MSCI United Kingdom Index Fund 31.09  

0.42

1.36%

2.44% 3.43%
EWX SPDR S&P Emerging Markets Small Cap ETF 41.58  

0.56

1.36%

2.19% 1%
EWP iShares MSCI Spain Index Fund 26.76  

0.36

1.35%

6.27% 6.32%
EWS iShares MSCI Singapore Index Fund 22  

0.29

1.33%

2.66% 4.51%
DXJ WisdomTree Japan Total Dividend Fund 49.99  

0.63

1.27%

2.50% 1.61%
EWM iShares MSCI Malaysia Index Fund 29.91  

0.37

1.24%

1.77% 2.12%
EWT iShares MSCI Taiwan Index Fund 31.26  

0.36

1.16%

2.49% 1.69%
FXI iShares FTSE/Xinhua China 25 Index Fund 37.69  

0.43

1.15%

1.02% 0.27%
EWC iShares MSCI Canada Index Fund 26.65  

0.29

1.09%

1.60% 2.46%
EWN iShares MSCI Netherlands Index Fund 24.11  

0.24

1%

4.06% 2.46%
EWK iShares MSCI Belgium Index Fund 17.57  

0.13

0.74%

3.54% 2.57%
EWH iShares MSCI Hong Kong Index Fund 20.97  

0.14

0.67%

1.11% -0.94%
EWL iShares MSCI Switzerland Index Fund 28.96  

0.11

0.38%

2.30% 2.15%

 

Week Ahead – Events and Economic Data

12/8 Thursday

Time Event / Data
08:00 ECB Meeting
08:30 Initial Jobless Claims

 

12/9 Friday

Time Event / Data
10:00 Michigan Consumer Sentiment

 

 

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