The first three days of the week I am going to be acting as guest host on a new CNNfn morning show from 9-11am EST. That means the morning commentary is going to be short on words and long on graphs through Wednesday. Today will cover the intermediate-term outlook and how the last week has affected the charts. Tomorrow will have the daily readings and Wednesday will have a look at the various widely followed industry groups.
Friday's action "felt" like it meant something. Volatility was high and the news was coming fast and furious, both on the positive and especially negative sides. During times like these it is so easy to get wrapped up in the minute-to-minute emotions that little movements that may be acted on do very little to change the intermediate-term landscape. Such was the case last week. What I like to do when daily emotions are all over the place is go back and review my strategy to see if anything has changed. This is what I wrote on February 26th:
There are basically three things that could change my intermediate-term view (remember that I DO NOT make trading calls) that the outlook for stocks is neutral at best near-term;
1. If a war related dislocation brought the market down enough to get the near and intermediate-term indicators near levels where prior lows have been established
2. If Blue Chip corporate America began saying how sharply demand was picking up and began guiding estimates higher.
3. If neither of the above happened and the major market indices moved above their late November and early January highs on convincing volume.
While there is always potential for sharp bounces, they should remain fleeting until some or even one of the fundamental, technical or geo-political issues are resolved.
So far, none of the above has taken place and the intermediate-term picture was not impacted by all the "pivotal" action created by "key" events last week as seen in the below charts. There is always the possibility of a spike day on some news, but until the above changes, I doubt that any move higher would be sustainable.
Exhibit 1 - The weekly stochastics have not changed any more than the trend lately
Exhibit 2 - A different way to look at MACD shows the same thing
Exhibit 3 - Be careful to not look too hard for positive divergences - last year showed they could be dangerous.
Exhibit 4 - Still no extremes below 200-day moving average - yet.
Exhibit 5 - A sideways week yielded no new info relative to VIX index.
Graphs courtesy of Baseline, Inc.
Brief Weekly Economic Overview from Kirlin's new Fixed Income and Economics Strategist, Brian Reynolds.
There will be little economic news to move markets in the first half of this week, but the pace of releases will intensify toward the end of the week.
Wednesday will bring the Mortgage Bankers refinancing numbers, which have risen as bond yields and mortgage rates have fallen. That day also brings the trade deficit number for December, which is normally not market moving. However, with the dollar currently weak, a number significantly worse than the expected $43 billion could upset markets.
Thursday brings unemployment claims and February retail sales. Both series have been pointing to weakness lately, and are expected to again. Friday brings a look at a wide range of numbers: business inventories, industrial production, producer prices, and consumer sentiment. All are expected to be negative reports. Inventories are expected to be up modestly, portending future production cutbacks in addition to the 0.1% decline in output that is expected. The PPI is expected to be up a hefty 0.8% because of energy costs, and consumer sentiment is expected to decline again. The one silver lining is that, with negative expectations so high for so many reports, there is the possibility of a positive surprise or two.
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