Weekly Market Update – 12 June 2017 BMO

Just a quick reminder first:

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I will be hosting my very first independent Preview Session for the Pattern Trader Tutorial’s upcoming batch in August:

Date: Tuesday, 20 June 2017
Time: 07:00pm to 10:00pm (registration starts at 06:30PM)
Venue:
51 Cuppage Road,
Acc EduHub #03-03

Vibrant Room 3
Singapore 229469
(behind The Centrepoint & next to The Holiday Inn Hotel)

For Tutorial details, go here: PTT91 in Singapore

REMEMBER to book your free complimentary HERE: INTRODUCTORY SESSION TO MACROTRADING

Weekly Market Update – 12 June 2017 BMO

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The stock market successfully hurdled several key macro events, including the testimony of former FBI Director James Comey, the latest policy decision from the European Central Bank, and the UK general election, only to get tripped up by tech stocks on Friday. The major averages settled the week mixed with the Dow adding 0.3% while the S&P 500 and the Nasdaq lost 0.3% and 1.6%, respectively.

Following back-to-back losses for the S&P 500 on Monday (-0.1%) and Tuesday (-0.3%), financials led the benchmark index to its first win of the week in the midweek session (+0.2%), even in the face of a bearish inventory report from the Energy Information Administration. Crude oil plunged nearly 5.0% after the EIA showed a build in both crude and gasoline inventories for the week ended June 2.

However, prepared remarks from Mr. James Comey, which were released to the public ahead of Thursday’s testimony, were the focal point of Wednesday’s session. The initial response to the statement was positive as market participants were seemingly heartened by the understanding that there wasn’t any overt obstruction of justice claim against President Trump.

On Thursday, the Senate Intelligence Committee directly asked Mr. Comey if he thought Mr. Trump was trying to obstruct justice during their meeting on February 14 when he told Mr. Comey that he hoped the FBI could let go of the investigation of former National Security Adviser Michael Flynn. Mr. Comey responded that it wasn’t for him to say and he would let others make that determination.

Investors breathed a sigh of relief, not only in reaction to Mr. Comey’s testimony, but also in reaction to the ECB’s decision to leave interest rates unchanged, as expected. With two of the week’s three major events in the rearview mirror, the financial sector led the S&P 500 to its second victory of the week. However, gains were held in check as investors awaited the results of the UK general election.

Sure enough, the Brits threw the world for a loop, yet again, as Prime Minister Theresa May’s Conservative Party lost its parliamentary majority. The pound dropped noticeably following the results while European markets took the news in stride. Meanwhile, U.S. indices ended the week lower as high-flying, mega-cap names like Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), and Facebook (FB), and semiconductor stocks, like NVIDIA (NVDA), came under some notable profit-taking pressure.

The top-weighted technology sector, which houses five of the six aforementioned companies, plunged 2.7% on Friday. However, the financials and energy sectors, which have been underperforming all year, helped keep the tech group’s bearish influence in check, adding big gains of 1.9% and 2.5%, respectively, in what had the appearance of a sector rotation trade.

The major U.S. indices closed the week on a mixed note as a sector rotation trade pitted the top-weighted technology sector (-2.7%) against the financials (+1.9%) and energy (+2.5%) groups. The tech-heavy Nasdaq (-1.8%) finished solidly lower while the S&P 500 (-0.1%) settled just a tick below its unchanged mark. Meanwhile, the Dow and the Russell 2000 outperformed, adding 0.4% apiece. For the week, the S&P 500 declined 0.3%.

The fed funds futures market still points to the June FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 95.8%, unchanged from last week. The U.S. central bank will kick off its two-day meeting on Tuesday with the rate-hike decision crossing the wires on Wednesday afternoon at 14:00 ET.

(Excerpts from Briefing.com)

GDP, Dollar

Bonds yields: Treasury Yields recover from Post-Election Lows but flattens a little more on the shorter maturities.

Commodities: WTI Crude closes below previous week in spite of rally following rig count data. 

Agriculture: Grains recover.

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Wk24forJUNE THE WEEK AHEAD

Remember I said that June has historically been the most unpredictable month of the trading year? This coming week is typical of that phenomenon in that the statistics are all over the place when you sort them out in different timeframes. Nothing is reliable across the various averages.

Monday 12 June to Friday 16 June (Week 24)

The twenty-fourth week of 2017 (wk24) is mildly bullish for the DIA and the SPY over the last 5 years but the 10 and 15 year averages are unusable for any indication. 

The 2017 Stock Trader’s Almanac’s averages (based on 21 years) for week 24;

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Key Economic Dates

Mon 12 June

Tue 13 June

Wed 14 June

Thu 15 June

Fri 16 June

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SUMMARY

More signs of market weakness as the major indices displayed very divergent action on Friday mainly because the “FAANG” stocks suffered a blood bath Friday. FAANG stocks are Facebook FB, -3.30%, Amazon AMZN, -3.16%, Apple AAPL, -3.88%Netflix NFLX, -4.73% and Google GOOG, -3.41% GOOGL, -3.40%. This is a significant signal as the FAANG group has consistently outperformed (thus a bubble) as large-cap U.S. technology stocks.

In the coming week, the most important event is the Fed Monetary Policy decision, with markets anticipating another hike in the Federal Funds Rate. The Bank of England and the Bank of Japan are expected to leave monetary policy on hold.

On the local front, the press is telling us what what I have been saying for months now: singapore-current-economy-4-charts-040033035.html. I don’t know how the Little Red Dot is going to avoid another quarter of contraction that would officially put it in recession.

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The numbers have been consistently been so poor that nothing short of a miracle or another round of creative accounting is going to avert the inevitable.

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