First Trust NASDAQ Global Auto (CARZ)
March retail sales ex-autos increased 0.1 percent, in line with expectations. A drop in auto sales, however, pulled the total to -0.3 percent. Auto stocks nonetheless rose more than 2 percent on the day.
CARZ is down about 20 percent from its peak last summer, but the group is expected to report strong earnings in the first quarter. A move past $33.50 would lift CARZ to a 3-month high.
The healthcare sector is expected to report positive first-quarter earnings growth. Medical devices have already climbed to a new 52-week high. Medical providers, biotech and pharma have weighed on the sector, but have recently rebounded. A shift towards biotech and pharma is likely as investors rotate into cheaper shares, but momentum investors may stick with the leading medical device sector.
SPY, DIA, MDY and IWM are all at key junctures. The S&P 500 Index and Dow Jones Industrial Average are on the verge of setting new all-time highs, while the mid- and small-cap indexes are approaching levels which marked short-term peaks over the past nine months.
SDY shows dividend shares remain popular with investors, with the fund pressing on to new highs while keeping pace with SPY. Often there is a rotation from defensive shares into more aggressive sectors when the market rallies from a pullback, but charts have yet to indicate a shift.
WisdomTree Bloomberg USD Bullish (USDU)
CurrencyShares Euro Trust (FXE)
CurrencyShares British Pound (FXB)
CurrencyShares Canadian Dollar (FXC)
CurrencyShares Japanese Yen (FXY)
WisdomTree Emerging Market Currency (CEW)
The U.S. dollar spent another week around the low end of its trading range. Emerging market currencies pushed to new 2016 highs on the back of stronger oil prices, as did the Canadian dollar.
The most watched currency of the moment is the Japanese yen. A reversal to 2014 levels, or roughly 100 yen to the U.S. dollar, is possible.
Crude oil prices are rising ahead of OPEC's meeting in Doha this weekend. Trading may lighten as the week closes as traders limit exposure to a potential shock.
Commodity prices rebounded on Wednesday following stronger Chinese export data. Steel saw the largest gain as it benefits from protectionism.
SPDR Utilities (XLU)
SPDR Pharmaceuticals (XPH)
SPDR Materials (XLB)
SPDR Consumer Staples (XLP)
SPDR Consumer Discretionary (XLY)
SPDR Healthcare (XLV)
SPDR Technology (XLK)
SPDR Financials (XLF)
SPDR Retail (XRT)
Energy advanced as oil prices pushed back above $40 a barrel. Homebuilders have enjoyed a strong rally this year, bringing ITB back to the trading range where it spent all of 2015. A couple of homebuilders already reported strong earnings in March. Homebuilder confidence for April, housing starts, building permits and existing home sales for March will be released next week.
LQD finally took a breather last week, ending a two-month uninterrupted rally. The first half of LQD's rally, from mid-February to mid-March, was driven by easing credit concerns and occurred with rising treasury yields. LQD rallied further as treasury yields fell into April. Last week's jump in treasury yields, and the dip in LQD, indicates interest rates are now driving the market. High yield bonds, in contrast, pushed higher as investors reacted to rising oil prices.
Gold miners enjoyed a blow-off rally over the past week, a move driven by short-covering. Short interest in mining shares started falling in late March and likely accelerated in the past week as prices spiked. Gold prices fell sharply on Wednesday as investors moved to riskier assets
iShares MSCI Malaysia (EWM)
One of the stronger emerging markets at the moment is Malaysia. Shares have recovered from the August 2015 sell-off and are approaching the $9.25 level that market support in early 2015. Economic growth in Malaysia tops 4 percent and faster growth is possible. Unlike China, which is dealing with an aging population, Malaysia has a positive demographic dividend.
FDN and PNQI fell nearly 25 percent from the end of 2015 into early February. Since then, they have recovered, but as the price ratio chart of PNQI to SPY shows, these shares only outperformed for a little over a week before losing momentum. The flat line in PNQI shows investors have done as well in SPY as PNQI over the past two months.
Domestic Internet firms anticipate a strong earnings season. With positive results from major components such as Facebook (NASDAQ:FB), the sector could quickly challenge 2015 highs. The first big Internet stock to report will be Netflix (NASDAQ:NFLX), after the bell on Monday April 18, followed by Amazon (NASDAQ:AMZN) on April 21 and Facebook on April 27.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.