Stock Market Fund Flows Talking Points:
- Broad-market ETFs SPY, IVV and VOO notched $11.4 billion in outflows for the week
- The XLU Utilities ETF posted its tenth consecutive week of gains
- Interested in equities and ETF fund flows? Sign up for the weekly webinar: Stock Market Catalysts for the Week Ahead
Stock Market Fund Flows: S&P 500 Breaches 2,815 as Inflows Persist
The S&P 500 closed above a critical level on Friday, successfully breaching resistance that held firm since early October. With the move the index notched five-month highs, closing at 2,822, the highest close since October 9th. At the same time, the broad-market exchange traded funds I cover recorded respectable inflows.
S&P 500 Price Chart: 4 – Hour Time Frame (October 2018 – March 2019) (Chart 1)
The aggregate fund flows of SPY, IVV and VOO totaled $11.4 billion this week, the largest weekly inflow since late December. IVV offered a standout performance with an intraday inflow of $4.1 billion, the largest in over a year for the ETF. While the general-market tracking funds helped the S&P 500 press higher, notable performances from generally defensive sectors assisted in the effort.
Aggregate Fund Flows for Broad Market ETFs versus S&P 500 (Chart 2)
Utilities Climb for a Tenth Week
One such performance was from the XLU ETF. The fund seeks exposure to US utility companies, typically viewed as a defensive industry due to their lack of cyclicality and tepid growth prospects. Investors seem unconcerned with the industry’s investment profile as XLU closed higher Friday to notch a tenth consecutive week of gains.
XLU ETF Price Chart: Weekly Time Frame (January 2017 – March 2019) (Chart 3)
XLU ETF price chart overlaid with S&P 500 in red. Consecutive candlestick indicator highlighted. (If after-hours market movement is accounted for, this week marks just the 8th week of gains)
XLU ETF Fund Flows (Chart 4)
During the ten-week run, the fund registered $450 million in net inflows – roughly 5% of the fund’s $9 billion in assets under management.
Healthcare Flows Witness Volatility
While investors were determined to gain exposure in the utilities sector, another defensive sector lacked such commitment. Last week I highlighted the large inflows into the XLV healthcare ETF. This week, the fund saw considerable inflows, but was matched in earnest by outflows.
XLV ETF Fund Flows (Chart 5)
The considerable demand for healthcare appears to have been a false flag for an equity downturn. That being said, capital shifts to XLV remain extreme. In the last two weeks alone, the fund recorded four of its six largest intraday flows over the last year. While outflows have proved robust, the fund recorded $320 million in net inflows since March 4th.
In the week ahead, defensive sector performance will be important to watch as investors look to Wednesday’s Fed rate decision. Should Chairman Powell strike a hawkish tone, the typical rotation into defensive sectors may be skewed by their recent strong performance and the overbought stature of XLU. With the defensive-sector landscape at present, a risk-off mood in markets could drive equity investors to shift capital into defensive assets outside the bounds of equities.
Read more: Will the Stock Market Crash in 2019?
–Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.
Weekly Trade Levels for US Dollar, Euro, Sterling, Loonie, Gold & Oil
DXY, Euro, Loonie Monthly Opening-Ranges Intact
The US Dollar Index is trading into the monthly opening-range highs into the start of the week and the focus is a reaction around the 98.05/10 resistance zone- note that the monthly ranges in Euro and Loonie also remain intact. In this webinar we review updated technical setups on DXY, EUR/USD, USD/CAD, GBP/USD, Crude Oil (WTI), Gold, USD/JPY, AUD/USD, EUR/AUD & SPX.
Why does the average trader lose? Avoid these Mistakes in your trading
Key Trade Levels in Focus
DXY – Immediate focus is on topside resistance at 98.05/10. Initial support at 97.87 with near-term bullish invalidation raised to 97.71.
EUR/USD – Euro is coiling into the monthly opening-range just above slope support. Immediate focus is on support at 1.1140. Initial resistance at 1.1187 with near-term bearish invalidation at monthly-open resistance at 1.1215– look for a bigger reaction there IF reached. A break lower would expose 1.1110.
GBP/USD – Sterling broke below multi-month slope support last week with price responding to near-term pitchfork support into the open. Initial resistance at 1.2798 with bearish invalidation at 1.2859. Downside support objectives at the August low-day close at 1.2697 and the 100% extension at 1.2662.
Gold – Risk for near-term recovery while above the yearly / monthly low-day close at 1270. Initial resistance at 1280 with near-term bearish invalidation with the monthly open a 1283.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Key Event Risk This Week
Economic Calendar – latest economic developments and upcoming event risk
Active Trade Setups:
—Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex
AUDUSD Soars on Shock Election, Apple Shares Slump, Risk of S&P 500 Drop
AUD: The Aussie outperforms following a shock election outcome, in which Prime Minister Scott Morrison secured re-election (full story). In reaction, the Aussie gapped higher at the Asia open, reclaiming the 0.69 handle against the greenback. However, as equity markets have headed lower throughout the European morning, risks are for gains to be faded. Alongside this, key headwinds in the form of trade war tensions and a potential RBA June rate cut are likely to limit upside. Reminder, RBA Governor Lowe due to speak tonight after RBA meeting minutes (calendar)
Crude Oil: Oil prices surged at the Asia open as Saudi Arabia signalled that cuts could be extended throughout the remainder of 2019 at the JMMC meeting, while President Trump had also stepped up his critical rhetoric towards Iran. Although, with equity prices beginning to push lower, oil prices have pared the majority of its initial gains.
Equities: US equity futures have headed lower amid the continued crackdown by the US on China’s Huawei, which in turn has chipmakers come under pressure, while Google also stated that they are to restrict the company’s use on android services. Elsewhere, Apple’s price target had been cut by HSBC to $174 (median street price target = $220), citing concerns over China, while tariff led price increases on Apple products could also have dire consequences on demand. Apple shares currently lower by 2.4% in pre-market.
Source: DailyFX, Thomson Reuters
DailyFX Economic Calendar: – North American Releases
WHAT’S DRIVING MARKETS TODAY
- “Gold Price Sell-Off Continues, Silver Price Hits a Six-Month Low” by Nick Cawley, Market Analyst
- “COT Report: Japanese Yen and Euro Shorts Collapse, USD Longs Reduced” by Justin McQueen, Market Analyst
- “Crude Oil Price May Be Carving Out a Top” by Paul Robinson, Currency Strategist
- “Using FX To Effectively Trade Global Market Themes at IG” by Tyler Yell, CMT , Forex Trading Instructor
— Written by Justin McQueen, Market Analyst
To contact Justin, email him at Justin.email@example.com
Follow Justin on Twitter @JMcQueenFX
Gold Price Sell-Off Continues, Silver Price Hits a Six-Month Low
Gold (XAU) and Silver (XAG) Price Analysis and Charts.
Gold (XAU) Needs to Support to Hold
The sell-off on gold continues with the precious metal down around $30 in less than a week. Gold is under pressure from a resurgent US dollar, buoyed by last Friday’s Uni of Michigan data which smashed expectations and hit a multi-year high. The important 61.8% Fibonacci retracement level at $1,287/oz. failed to provide any support when broken last week, while the $1,287 – $1,281/oz. zone made up of old horizontal support is being tested now. A clear break and close below opens the way to the recent double bottom around $1,266/oz. which is currently being guarded by the 200-day moving average at $1,268.6/oz. Below here the 50% Fibonacci retracement level at $1,262/oz heaves into view.
Gold (XAU) Daily Price Chart (August 2018 – May 20, 2019)
Silver (XAG) Nears a Fresh Six-Month Low
Another precious metal under heavy selling pressure. Silver is now at levels last seen in early December last year and is over 11% lower since making its recent high of $16.21/oz. in late February. The downtrend since the late-February high continues to be respected and it is possible that silver completely retraces all the way back down to the November 14 low at $13.89/oz. Psychological support at $14.00/oz. may slow the decline, while the CCI indicator shows that the market is extremely oversold.
Silver (XAG) Daily Price Chart (August 2018 – May 20, 2019)
IG Client Sentiment data show that retail traders are 79.1% net-long gold, a bearish contrarian indicator. Recent daily and weekly sentiment shifts give us a stronger bearish contrarian bias.
— Written by Nick Cawley, Market Analyst
To contact Nick, email him at firstname.lastname@example.org
Follow Nick on Twitter @nickcawley1
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