Financials' Pre-Earnings Decline As Emerging Markets Struggle While Oil Rallies

This is an abridged version of our Daily Report.

Pre-earnings decline

Financials dropped 4% in the months leading up to the current earnings season, which begins this week as banks start to release quarterly earnings.

Similar selloffs since 1950 preceded rallies over the next month, though it wasn’t a strong edge.

A crude decoupling

Emerging markets have declined even as crude oil prices rallied since March. This is atypical, since there is a strong positive correlation between those stocks and oil.

Other decouplings preceded consistent multi-month rallies in emerging markets.

The latest Commitments of Traders report was released, covering positions through last Tuesday

“Smart money” hedgers moved to a new record long position in coffee, exceeding their prior record from April. They’ve added aggressively to the Canadian dollar over the past two weeks, now long more than 50k contracts, which has preceded a slowing down or stop in selling pressure in the loonie over the short- to medium-term.