Macro Market · Market Commentary · Newsletter · Portfolio Update

Weekly Commentary – The Grand Finale

Just 3 more weeks before 2016 draws to a close with only one major event ahead of us, which is none other than the FOMC announcement this coming Wednesday. US equities remain unstoppable since the breakout move last Wednesday and finished green the rest of the week to finish at the highs, as the SPX and Dow were both up a stellar 3%. Technicals are clearly on breakout mode across the board, though seasonality turns neutral to slightly negative as shown in the SPX post-election roadmap below.

20161212-spx20161212-spxroadmap

Broad based strength with all sectors in the green for the week except for Biotechs (IBB), with Small Caps Russell 2000 (IWM) and Regional Banks (KRE) once again leading the way, both levitating another 5.66%. Retail (XRT) resumed its breakout mode after a brief retracement post Thanksgiving, and has little resistance until its previous ATHs of 50.

20161212-XRT.png

In other news, the much anticipated production deal was finally agreed upon over the weekend with cooperation between OPEC and non-OPEC nations. To wit, “On Saturday, producers from outside OPEC agreed to reduce output by 558,000 barrels a day, the largest-ever contribution by non-OPEC countries. Russia has pledged to cut most among the non-OPEC countries at 300,000 barrels a day.”

http://www.cnbc.com/2016/12/11/oil-jumps-after-russia-joins-opec-cut-but-deal-a-temporary-fix-analyst.html

Fundamentally still many questions and doubts but technically the price impact was evident with Crude Oil jumping 5% to begin the week. More critically, it is breaking through its long-term descending wedge to the upside and is a hair from YTD high of $55. A break above would point to $60 as next target.

20161212-CL.png

The resurging crude oil would certainly help extend the breakout in Energy sector (XLE), which has a ST upside target of 80, about 5% away from current price point. Given the strong price action in crude oil, XLE may see a gap up towards that level as soon as Monday.

20161212-XLE.png

The US Dollar also had a resurgent week on the heels of dovish ECB meeting, which helped propel the DXY inches away from its YTD highs. A bearish case is that it is in the process of forming a double top, as DXY retest previous highs on lower RSI, similar to March 2015 and August 2015 topping pattern.

20161212-DXY.png

Catalytically, the FOMC meeting would certainly set the tone. Since the market effectively already priced in the second rate hike since 2007, it will be the forward guidance and press conference which will be much watched. The general consensus is that “On forward guidance, the Fed will keep open the possibility of multiple hikes in 2017 in anticipation of a solid economic baseline for next year but also the new upside for growth and inflation associated with the recent policy announcements by President-elect Donald Trump.”

https://www.bloomberg.com/view/articles/2016-12-08/5-things-to-watch-for-in-next-week-s-fed-meeting

The scenario of a “buy the rumor, sell the fact” in the US Dollar is definitely plausible with sentiment so lopsidedly in favor of further gains in US Dollar. On that note, the lopsided move in Yen continued unabated, now down 5 weeks in a row with USD/JPY retracing just under 116, a level last seen in Feb 2016.  Looking at the JPY futures contract, one interesting observation is that Speculators’ net positioning has turned short for the first time since beginning of the year, during which the year-long rally in Yen started. In other words, the Speculators (e.g. hedge funds and fast money) had been net long all year long, fueling the rally in Yen. Consequently, the unwind of the long positioning ensured a round-trip back to nearly unchanged of the year. Indeed a zero sum game.

20161212-JPY.png

Meanwhile, the Treasuries continue to be overstretched, and now in a historic fashion. Specifically, the weekly RSI in 30Y Treasury Yield has risen to above 70 for only the 3rd time since 2000, with the two other occasions (2000, 2006) marking a cyclical top. A more dovish than expected Fed or simply “buy-the-news” could trigger a massive squeeze without a doubt.

20161212-30Y.png

So expect increased volatility in markets, particularly US Dollar and interest rates, even if the Fed announcement itself is a non-event. A little snapback in this outsized move could be more violent than many would imagine.

 

Weekly Market Snapshot

Sector ETFs by Daily Return %

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
IWM iShares Russell 2000 138.31  

0.27

0.20%

5.66% 5.09%
KRE SPDR KBW Regional Banking ETF 56.03  

0.12

0.21%

5.66% 6.91%
XRT SPDR S&P Retail ETF 47.94  

-0.22

-0.46%

5.11% 4.88%
XLF SPDR Select Sector Fund – Financial 23.75  

0.05

0.21%

4.86% 5.51%
SMH HOLDRS Merrill Lynch Semiconductor 71.68  

-0.37

-0.51%

4.23% 0.87%
XLK SPDR Select Sector Fund – Technology 48.65  

0.35

0.72%

4.20% 2.42%
IYR iShares Dow Jones U.S. Real Estate Index Fund 77.32  

-0.06

-0.08%

3.85% 3.30%
XLY SPDR Select Sector Fund – Consumer Discretionary 84.31  

0.19

0.23%

3.52% 3.01%
XLG Rydex Russell Top 50 ETF 158.1  

1.43

0.91%

3.32% 2.67%
QQQ PowerShares QQQ Trust 119.5  

0.93

0.78%

3.31% 1.69%
SPY SPDR S&P 500 226.51  

1.36

0.60%

3.11% 2.78%
DIA Dow Jones Industrial Average ETF 197.69  

1.41

0.72%

3.10% 3.29%
XLB Materials Select Sector SPDR 51.5  

0.01

0.02%

3.04% 3.12%
XLP SPDR Select Sector Fund – Consumer Staples 52.04  

0.74

1.43%

2.91% 2.89%
XLU SPDR Select Sector Fund – Utilities 47.96  

0.5

1.05%

2.48% 2.59%
XLE SPDR Select Sector Fund – Energy Select Sector 76.6  

0.24

0.31%

2.37% 2.92%
XLI SPDR Select Sector Fund – Industrial 63.98  

0.29

0.45%

1.86% 2.52%
XLV SPDR Select Sector Fund – Health Care 68.85  

0.83

1.21%

0.64% 0.15%
PFF iShares S&P US Preferred Stock Fund 37.13  

-0.09

-0.24%

0.30% -0.93%
IBB iShares Nasdaq Biotechnology 269.67  

1.15

0.43%

-0.29% -1.61%
           

Commodity & Bond ETFs

SYMBOL NAME CLOSE DAILY  (%) WTD % MTD %
HYG iShares iBoxx $ HY Corp Bond Fund 86.49  

0.04

0.05%

1.30% 0.98%
SLV iShares Silver Trust 15.97  

-0.17

-1.06%

0.88% 1.98%
DBA PowerShares DB Agriculture Fund 19.8  

-0.02

-0.10%

0.61% -0.70%
AGG iShares Barclays Aggregate Bond Fund 107.84  

-0.33

-0.31%

-0.17% -0.37%
LQD iBoxx $ Investment Grade Corporate Bond Fund 116.2  

-0.45

-0.39%

-0.17% -0.55%
USO United States Oil Fund 11.44  

0.13

1.14%

-0.35% 4.67%
GLD SPDR Gold Trust 110.4  

-1.17

-1.05%

-1.55% -1.21%
TLT iShares Barclays 20 Year Treasury Bond Fund 117.5  

-1.48

-1.25%

-1.76% -2.28%
GDX Market Vectors TR Gold Miners 20.67  

-0.79

-3.75%

-3.28% -0.77%

Country ETFs

SYMBOL NAME CLOSE DAILY (%) WTD % MTD %
EWP iShares MSCI Spain Index Fund 26.84  

0.01

0.04%

6.59% 6.63%
EWI iShares MSCI Italy Index Fund 23.49  

-0.23

-0.97%

6.15% 8%
EWW iShares MSCI Mexico Index Fund 45.84  

0.29

0.63%

6.06% 3.90%
DXJ WisdomTree Japan Total Dividend Fund 51.46  

0.77

1.51%

5.52% 4.59%
EWG iShares MSCI Germany Index Fund 26.09  

0.02

0.08%

5.46% 5.07%
EWD iShares MSCI Sweden Index Fund 28.78  

0.19

0.66%

4.88% 4.69%
EWQ iShares MSCI France Index Fund 24.44  

0.07

0.29%

4.49% 4.22%
EWN iShares MSCI Netherlands Index Fund 24.03  

0.11

0.46%

3.71% 2.12%
EWZ iShares MSCI Brazil Index Fund 32.82  

-0.19

-0.58%

3.60% -2%
EWO iShares MSCI Austria Index Fund 16.63  

-0.21

-1.25%

3.36% 3.36%
EWJ iShares MSCI Japan Index Fund 51.25  

0.15

0.29%

3.28% 2.73%
EWY iShares MSCI South Korea Index Fund 55  

-0.41

-0.74%

3.21% 3.27%
EEM iShares MSCI Emerging Index Fund 36.17  

-0.19

-0.52%

2.99% 1.89%
EWL iShares MSCI Switzerland Index Fund 29.13  

0.4

1.38%

2.90% 2.75%
EWT iShares MSCI Taiwan Index Fund 31.36  

-0.17

-0.54%

2.82% 2.02%
EWU iShares MSCI United Kingdom Index Fund 31.18  

0.15

0.48%

2.73% 3.73%
EWC iShares MSCI Canada Index Fund 26.94  

0.08

0.30%

2.71% 3.58%
EWK iShares MSCI Belgium Index Fund 17.41  

-0.04

-0.23%

2.59% 1.63%
EWA iShares MSCI Australia Index Fund 21.15  

0.05

0.24%

2.22% 3.47%
EWM iShares MSCI Malaysia Index Fund 30.04  

-0.03

-0.10%

2.21% 2.56%
EWX SPDR S&P Emerging Markets Small Cap ETF 41.37  

-0.19

-0.46%

1.67% 0.49%
EWS iShares MSCI Singapore Index Fund 21.71  

-0.12

-0.55%

1.31% 3.14%
FXI iShares FTSE/Xinhua China 25 Index Fund 37.47  

-0.22

-0.59%

0.43% -0.32%
EWH iShares MSCI Hong Kong Index Fund 20.6  

-0.14

-0.68%

-0.68% -2.69%

 

Week Ahead – Events and Economic Data

12/14 Wednesday

Time Event / Data
08:30 PPI, Retail Sales
10:30 Crude Oil Inventories
14:00-14:30 FOMC Statement  & Press Conference

 

12/15 Thursday

Time Event / Data
08:30 CPI, Initial Jobless Claims

 

 

12/16 Friday

Time Event / Data
08:30 Housing Starts

 

Quantitative Strategy – Automated Portfolio Update

Performance

ASSET CLASS LONG or SHORT DAILY % MTD % QTD % YTD%
Equities Long Only        
0.13% 2.18% 6.10% 38.62%
  Short Only        
    -0.56% -4.41% -9.85% 24.47%
  Long/Short        
    -0.04% 0.84% 2.68% 35.34%
ETF Long Only        
    -0.24% 1.08% 1.23% 26.03%
  Short Only        
    -0.58% -4.07% -6.84% 0.81%
  Long/Short        
    -0.44% -1.83% -2.46% 24.98%
Futures Long/Short        
    -1.19% -1.72% -0.78% 5.77%
FX Long/Short        
    -0.96% -1.39% -3.75% 11.36%
SPX Benchmark Index        
    0.59% 2.76% 4.21% 10.55%

Daily Trade Signals

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Portfolio Commentary

We are pleased to announce that an upgrade to our Quant Strategy platform and we revamped our Medium-Term Equities portfolio which is catered for investors with longer-term horizon – All trade signals have a 50-100 trading day horizon, and no more than 30 positions at a time, hence easier to follow and less execution costs and risk. Also we are happy to announce that cooperation with MotifInvesting, our Equities (Short-Term and Medium-Term) and ETF (Consolidated) portfolios will be modelled and tracked on their website as of December 12th, 2016. You may see the portfolios here:

 

Equities Medium-Term: https://www.motifinvesting.com/motifs/wingcapital-quant-strategy-medi-Tbf1lykd

Equities Short-Term: https://www.motifinvesting.com/motifs/wingcapital-equities-quant-stra-v4WmlhOD

ETFs Medium & Short-Term: https://www.motifinvesting.com/motifs/wingcapital-etf-quant-strategy-Gjlxm1LX

 

With the sophisticated analytics that they provide, it will help us monitor and compare our portfolios with other indices and competitors. Also for all of our Medium-Term positions, we will resume posting technical analysis and outlook on a periodic basis this week. Stay Tuned. Below are current portfolio holdings as of 12/9:

 

SYMBOL NAME SECTOR INITIATE DATE INITIATE PRICE CURRENT PRICE TOTAL PNL % DAILY PNL %
Long 22 Holdings 15.5% -0.19%
LUV Southwest Airlines Industrials 2016-08-01 37.04 49.79 34.42% 0.38%
AIG American International Group, Inc. Financials 2016-08-05 59.10 65.83 11.39% 0.02%
KLAC KLA-Tencor Corp. Information Technology 2016-08-15 69.44 77.21 11.19% -2.08%
OKE ONEOK Energy 2016-08-16 47.11 57.01 21.01% -1.55%
UAL United Continental Holdings Industrials 2016-08-30 50.99 75.17 47.42% 3.34%
LMT Lockheed Martin Corp. Industrials 2016-09-08 241.63 259.53 7.41% 0.11%
SWKS Skyworks Solutions Information Technology 2016-09-09 66.76 76.93 15.23% -3.26%
WYN Wyndham Worldwide Consumer Discretionary 2016-09-09 66.88 77.87 16.43% 0.85%
HD Home Depot Consumer Discretionary 2016-09-09 127.74 133.39 4.42% 0.65%
CMI Cummins Inc. Industrials 2016-09-09 116.81 142.25 21.78% -1.06%
WY Weyerhaeuser Corp. Financials 2016-09-13 30.00 32.72 9.07% -0.18%
NUE Nucor Corp. Materials 2016-09-13 46.02 65.37 42.05% -1.57%
CXO Concho Resources Energy 2016-09-13 124.52 142.36 14.33% -0.29%
WFC Wells Fargo & Company Financials 2016-09-28 45.31 57.14 26.11% -0.26%
CRM Salesforce.com Information Technology 2016-10-05 68.42 71.17 4.02% -0.96%
RHI Robert Half International Industrials 2016-10-10 38.78 48.47 24.99% -0.8%
PCG PG&E Corp. Utilities 2016-10-12 59.31 59.33 0.03% 0.24%
VRTX Vertex Pharmaceuticals Inc Health Care 2016-10-13 80.56 76.67 -4.83% -0.71%
ENDP Endo International Health Care 2016-11-08 14.51 15.64 7.79% -0.06%
CCI Crown Castle International Corp. Financials 2016-11-17 85.11 85.57 0.54% 0.67%
PWR Quanta Services Inc. Industrials 2016-11-18 31.92 35.58 11.47% 1.37%
FCX Freeport-McMoran Cp & Gld Materials 2016-11-18 13.73 15.75 14.71% 0.96%

 

 

 

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