ETF Watchlist for June 9, 2016

SPDR S&P 500 (SPY)
iShares Russell 2000 (IWM)
S&P Midcap 400 (MDY)
PowerShares QQQ (QQQ)
SPDR S&P Dividend (SDY)

The index chart below illustrates the performance of major indexes since the February low. Both small- and mid-caps have sharply accelerated since late May. These asset classes have underperformed large-caps over the past couple of years, so there’s still room for them to catch-up. particularly the small-caps. The S&P 500 Index and Dow Jones Industrial Average both anticipate new highs.

The S&P 500 Index is less than 0.4 percent away from its all-time high.

First Trust Dow Jones Internet (FDN)
Global X Social Media (SOCL)
First Trust ISE Cloud Computing (SKYY)
iShares PHLX Semiconductor (SOXX)

The cloud computing sector pushed on to a new all-time high. Internet, social media and semiconductors are all less than 10 percent from their prior all-time highs.

SPDR Energy (XLE)
FirstTrust ISE Revere Natural Gas (FCG)
Global X Copper Miners (COPX)
Market Vectors Coal (KOL)
Market Vectors Steel (SLX)

Oil prices crossed $50 a barrel and commodities firmed over the past week. KOL and XLE are approaching highs set in late 2015.

Natural gas prices have risen 25 percent since late May as some jumpy investors anticipate the effects of La Nina. This past year has seen one of the strongest El Ninos on record, on par with the 1997-1998. An El Nino is marked by an above-average spike in Pacific Ocean water temperature, which leads to mild winters across much of the United States. It’s usually followed by a La Nina- a plunge in ocean temperatures associated with greater precipitation and colder winters for much of the U.S. A powerful La Nina began in 1998 and lasted into the early 2000s. Anyone who was heating with natural gas will remember prices spiking to $10 per MMBtu in late 2000 after natural gas supplies had been drawn down. Natural gas inventory is currently at the top of its 5-year range as the shift to La Nina begins.

iShares US Medical Devices (IHI)
iShares US Health Providers (IHF)
iShares Nasdaq Biotechnology (IBB)
SPDR Pharmaceuticals (XPH)

Biotechnology and pharma saw slower advances last week. Medical devices and healthcare providers sustained their current uptrend, as did the broader healthcare sector.

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)

In late May, Fed officials signaled a summer rate hike and the odds of a July rate increase rose steadily. Odds fell following May’s employment report, however. This continues to result in currency market volatility.

The British pound remains in an uptrend. Although polling data suggests the Brexit vote is tightening, a majority of British Members of Parliament (MPs) are in favor of remaining in the EU. Some have said they will ignore the vote if the public chooses to leave the EU, substantially reducing the risk of a British exit from the EU in the near term.

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)

Financials held up relatively well amid a general rise in stocks and divergent rate hike speculation. Utilities and real estate capitalized on interest rate hype, but the big winner for the week was energy, thanks to oil prices successfully breaking the $50 barrier.

Technology and consumer staples are approaching highs for the year. Industrials, represented by XLI, are at a new high for the year, as are utilities, materials and energy (shown above). Telecom and homebuilders are also nearing their highs for the year.

iShares iBoxx High Yield Corporate Bond (HYG)
iShares iBoxx Investment Grade Corporate Bond (LQD)

High-yield bonds have surged over the past week as oil prices rallied.  Corporate bonds ended their correction and broke to a new high this year. Even the 30-year Treasury bond is near a 2016 high. The 30-year yield is threatening the 2.5 percent level.

Market Vectors Gold Miners (GDX)
Global X Silver Miners (SIL)
SPDR Gold Shares (GLD)

Gold and silver miners broke out to new 52-week highs on Wednesday. Gold prices have lagged miners. If the Fed shifts expectations back to rate hikes next week, precious metals and bonds will be two of the most vulnerable assets.

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