Weekly Market Update (26/6/17 - 30/6/17)

The market's gone crazy because of the volatility last week.

SP500: -0.61%

The stock market endured some volatility, which resulted in a lower finish for the major indices. Relative weakness among technology stocks sent the Nasdaq Composite down 2.0% for the week while the S&P 500 surrendered 0.6%. The price-weighed Dow Jones Industrial Average (-0.2%) ended the week little changed.

The influential financial sector opened the week on a positive note, ending its four-session losing streak with a gain of 0.5%. However, negative performances from the heavily-weighted technology and health care groups mitigated the bullish influence of financials, leaving the benchmark index just a tick above its unchanged mark. Meanwhile, crude oil registered its third-consecutive win, climbing 0.8%.

Things got a bit more interesting on Tuesday, especially in the global bond market, where sovereign yields jumped after European Central Bank President Mario Draghi provided an upbeat assessment of eurozone inflation and growth trends. The financial group outperformed, once again, amid a steepening of the yield curve, but the ten remaining sectors finished in the red with the technology group pacing the retreat.

The midweek session brought some relief as investors bought the dip and put the S&P 500 back at its flat line for the week. The financials and technology sectors led the charge, but strength was broad-based with nine sectors settling in the green. The improvement in risk sentiment came after the ECB said that Mr. Draghi's Tuesday remarks were misinterpreted as hawkish while they were meant to strike a balance. However, longer-dated Treasuries and German bunds held their ground.

The relief rally didn't last long as the market reversed and set a fresh low for the week on Thursday. The technology sector fell to heavy profit-taking, dropping 1.8%. Selling was broad-based with only the financials and energy spaces escaping the session with wins. Banks underpinned the financial group after the Federal Reserve approved the capital plans of all 34 banks required to partake in the annual stress test.

Thursday also saw more selling in the global bond market. Treasuries tumbled in a curve-steepening trade while German bunds slid following hotter than expected inflation data out of Germany.

Friday's session featured a weak rebound in the broader market, as financials, health care, and technology struggled. NIKE (NKE) surged more than 10.0% after beating earnings expectations, which helped keep the market above water.

The fed funds futures market still points to the December FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 54.4%, up from last week's 51.3%.

• Nasdaq Composite +14.1% YTD

• S&P 500 +8.2% YTD

• Dow Jones Industrial Average +8.0% YTD

• Russell 2000 +4.3% YTD

(extracted from www.briefing.com)

Yield Performance:

The yield curve has steepened significantly after flattening last few weeks, indicating improved risk-on sentiment.

Sector Performance:

• Discretionary, Materials, Industrials ended the week a little unchanged from previous week's negative zone

• Staples continued its weakness from previous weeks

• Energy and Financials improved

• Healthcare and Real Estate pull back

• Technology and Utilities have shown weakness by continue dropping quite significantly since previous weeks.

Commodities Performance:

Crude oil closed higher.

Gold closed lower (insignificant).

Copper closed higher.

Silver closed lower (insignificant).

Week 27 BMO:

Historically, July ended with positive returns at a 80% reliability over the last 5 years. However, it doesn't have this high reliability over the last 10, 15, and 20 years, which are at 60%, 60%, and 50% respectively. This should be considered as quite consistent, given that over the last 20 years July has been ended with positive gains despite its reliability.

The coming week 27 has a reliability of 60% over the last 5 years with positive returns, and has been so for the last 20 years too. If you notice, coming Week 28 and 29 have a very high reliability at 80% and 100% respectively. However, Week 28 hasn't been consistent (including its returns and reliability factor), but Week 29 has been very consistent with the lowest reliability at 60% over the last 20 years.

Info: Stock Trader's Almanac 2017

• First trading day in July, Dow up 22 of last 27, average gain 0.6%

• Market subject to elevated volatility after July 4th

• July begins NASDAQ's worst 4 months

• July is the best month of the 3rd quarter

• Strength in the first half of July

• Huge gain in July usually provides better buying opportunity over next 4 months

• Post-presidential election year Julys are ranked #1 Dow (up 13 of 16), S&P500 (up 10 of 16), and #2 NASDAQ (up 9 of 11).

• When Dow and S&P500 in July are inferior, NASDAQ days tend to be even drearier.

Key Economic Dates:

Thoughts:

The market sure had experienced heart attack - relieved - heart attack - relieved moment last week. The SP500 record on my book shows green - red - green - red - green for the 5 trading days last week but it's surely a more bearish ones than bullish as SP500 closed 0.6% lower following continued weakness from the technology sector. It seems that buy-the-dip sentiment is still lingering in the technology sector but it's quite a vulnerable one, it might be that the market is quite convinced the technology sector is really overvalued and should be away for now but the fear hasn't really grown big enough yet to prompt a big selling or stop people from bidding it higher. Will it grow bigger or will it stop bleeding? I don't know, I wish I have a crystal ball too.

Judging from the yield and commodities performance, the market has a risk-on sentiment. The market was basically lifted up by the Financials as all other sectors are showing weaknesses last week. Otherwise, it wouldn't be just 0.6% being slashed away from the market. It's good to wait for the fog to be clear if you're unsure for now-- at least for me. I'm going to get myself prepared to trade the earnings season coming week because... it's a shortened trading week. Besides, there's also nothing exciting shown in the seasonal model and I want to wait for the fog to clear.

Tuesday is Independence Day (so market closed) and Monday would be a shortened trading day. It'll be a good timing to reflect on my trading mistakes and refine my strategy to be a better trader. Starting to trade during this volatile time instead of during a bull market would not be easy for my psychology, but it is a good training for myself so it'll be easier for me to overcome obstacles that will show up later. If you're in this business, I can assure you that you understand your characteristics do matter in affecting your performance. I'm glad that instead of being a working machine, this job helps me to strive to be a better one each day, be it in my career or my life. Would like to end this WeeklyMarketUpdates with a quote by Abraham Lincoln:

"If I had 8 hours to chop down a tree, I'd spend six sharpening my axe."

#Macros