MARKET – ACTION ALERT – NEUTRAL STOCKS! – NEUTRAL BONDS – NEUTRAL GOLD – AWAITING A SIGNAL TO RETURN TO BEAR STOCKS, BULL BONDS AND BULL GOLD WHICH IS THEIR PRIMARY NEAR-TERM TRENDS. WE’RE EXPERIENCING A ‘DEAD-CAT’ BOUNCE THAT COULD CARRY A BIT FURTHER, POSSIBLY INTO THE ‘IDES OF MARCH’.
The major U.S. indices began their week on an upbeat note as equities rallied in tandem with crude oil. Meanwhile, a reversal in industrial metals buoyed investor sentiment while chatter regarding a merger between industrial giants Honeywell (HON 105.17, -2.10) and United Technologies (UTX 92.37, +4.14) pushed the stock market to its highest level of the day. The averages ended off their best levels with the Nasdaq Composite (+1.5%) and the S&P 500 (+1.5%) leading the Dow Jones Industrial Average (+1.4%).
VRtrader.com clients are trading cement stocks ahead of Donald Trump’s potential victory and the resulting construction of a wall along the Mexican border. Other Republican candidates I believe are now mirroring his idea.
The TSX closed up 32.23 (0.25%) at 12845.63 and the TSX Venture closed up 3.62 at 534.41.
Ahead of Monday’s session, oil continued its rebound from the last week as a report from the International Energy Agency elicited a bullish response from investors. The IEA reported that U.S. shale production was expected to decline by 600,000 barrels per day (bpd) in 2016 while falling an additional 200,000 bpd in 2017. As a result, the oil market would begin rebalancing in 2017. Market participants ran with the mid-term outlook and bid WTI crude, sending the commodity higher by 5.1% to $33.38/bbl. Separately, rising industrial metal prices boosted investor confidence as it reportedly reflected receding worries regarding economic growth.
Predictably, commodity-sensitive energy (+2.2%) and materials (+1.9%) were able to end their day in the front of the pack as consumer discretionary (+1.9%) and industrials (+1.7%) followed. Oil and gas companies demonstrated relative strength in the energy sector and helped move the cyclical sector into positive territory for the month (+0.4%).
Honeywell and United Technologies initially spiked when CNBC reported that the two companies held merger talks. By the end of the day though, Honeywell settled lower by 2.0% while United Technologies climbed 4.7%. However, it is worth noting that United Technologies reportedly expressed concerns about the deal getting blocked on anti-trust grounds.
The Treasury complex traded in a narrow range, showing modest losses throughout the day. As a result, the yield on the 10-yr note edged up one basis point to 1.76%.
Well, if you’re not in New York this morning, you’re going to miss my presentation at the Trader’s Expo. Next week, on to Orlando at the Money Show at the Disney Contemporary HotelMarch 2-5. The events are free, so if you’re in the area, stop on by. I will be autographing my book, doing workship and recording some radio interviews. Morning updates will be abreviated on/off during this upcoming 3 week period.
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The DJ Industrials closed up 228.67 at 16620.66. The rally could carry to or through 17000. On January 20 it touched a corrective low of 15450.56 ‘remarkably’ holding 15370.33 theAugust 24 low. When that low comes out, look for another 1000 points to the downside on the way to 13350.
The S&P 500 closed up 27.72 at 1945.50. The rally could carry to the high 1900s. On February 11 the SPX traded at a new low of 1810.10. The next lower support is at SPX 1779. Downside is likely toward 1560. The SPX record high was at 2134.72 on May 20.
The Dow Transports closed up 135.16 at 7421.11. It touched a new bear market low at 6403.31 on January 20. The big bull market high from back on November 28, 2014 at 9310.22. A breakout above 9310.22, according to ‘Dow Theory’ is needed to get the overall stock market back ‘in gear’. Very, very, very unlikely anytime soon.
The Russell 2000 closed up 11.73 at 1021.74. It traded at a new low of 943.10 February 11. Its bull market high was posted at 1296.00 on June 23, 2015. The Russell 2000 relative weakness along with the DJ Transports have been the two key factors that built the bear case for the overall stock market.
The Nasdaq Composite closed up 66.18 at 4570.61. Traded at a new low of 4209.76 on February 11. The Nasdaq Composite has been cleverly “engineered” higher back up to or through its record high of 5132.52 from 15 years ago back on March 12, 2000 later touching 5175.77 on December 2, 2015. Wouldn’t you know it? As soon as the television financial mupppets started to talk about FANG stocks they topped out!
The CBOE Volatility Index (VIX) closed down 1.15 at 19.38. On January 20 the VIX touched 32.09 eclipsing the January 15 peak of 30.95. 53.29 intraday was the peak on August 24(the day of the morning flash crash). This may be a record high for the VIX. The VIX measures the cost of using options as insurance against declines in the S&P 500 (i.e., the higher the number, the more fear in the marketplace). The VIX has certainly traded at extremes. As you know, the lower we go in the VIX, the more likely a bear cycle could be around the corner as complacency reaches an extreme.
NYSE Advance/Decline – 2369/673
NASDAQ Advance/Decline – 1812/787
NYSE UP volume to DOWN – 10 to 1
NASDAQ UP volume to DOWN – 3 to 1
All of the nine major market sectors were higher on Monday:
XLB 41.53 +1.91% Materials
XLE 57.93 +2.55% Energy
XLF 21.20 +1.57% Financial
XLI 52.19 +1.70% Industrial
XLK 41.20 +1.33% Tech
XLP 51.09 +0.49% Consumer Discretionary
XLU 46.71 +1.17% Utilities
XLV 66.85 +1.43% Health Care
XLY 73.94 +1.94% Consumer
The week of February 22:
December Case-Shiller 20 City Home Price Index to be released at 9:00 AM EST on Tuesday
is expected to increase 5.8% on a year-over-year basis versus a gain of 5.8% in December
February Consumer Confidence to be released at 10:00 AM EST on Tuesday is expected to
slip to 97.3 from 98.1 in January.
January Existing Home Sales to be released at 10:00 AM EST on Tuesday are expected to drop
to 5.23 million units from 5.46 million units in December.
January New Home Sales to be released at 10:00 AM EST on Wednesday are expected to slip
to 523,000 units from 544,000 units in December.
Weekly Jobless Claims to be released at 8:30 AM EST on Thursday are expected to increase to
270,000 from 262,000 last week.
January Durable Goods Orders to be released at 8:30 AM EST on Thursday are expected to
increase 2.0% versus a decline of 5.0% in December. Excluding Transportation, January
Durable Goods Orders are expected to increase 0.4% versus a decline of 1.0% in December.
Second estimate of Fourth Quarter Real GDP to be released at 8:30 AM EST on Friday is
expected to slip to an annual rate of 0.4% from the previous estimate of 0.7%.
January Personal Income to be released at 8:30 AM EST on Friday is expected to increase
0.3% versus a gain of 0.3% in December. January Personal Spending is expected to increase
0.3% versus no change in December.
February Michigan Sentiment to be released at 10:00 AM EST on Friday is expected to slip to
91.0 from 92.0 in January.
Upcoming FOMC Meeting: