Courtesy of Blain.
Traders received an extra day this year but could do little with it. After opening near unchanged, it looked like buyers were taking charge again through 2 PM as there was a nice intraday rally – but a slew of selling in the last 2 hours led to moderate losses. The S&P 500 dropped 0.81% and the NASDAQ 0.71%. And with that, the major indexes have their first 3 month losing streak since 2011. The S&P 500 fell 0.4% while the NASDAQ dropped 1.2% in the month – that is probably surprising to many considering the rally the past few weeks but it shows how awful the first part of the month was.
The drumbeat of “meh” economic news continues: Chicago PMI came in at 47.6 in February, missing expectations and dropping from 55.6 in January. Any reading below 50 signals contraction. Pending home sales fell 2.5% in January, versus expectations for a slight gain. We get a lot of important data later this week with ISM Manufacturing and ISM Non-Manufacturing, and the monthly employment data Friday.
On the S&P 500 chart you see a purple line marking “1950ish” which is where rallies have recently petered out. So it was important to get over that level and stay there to mark a change in character. On the first attempt that did not happen. But indexes had come a long way in a short period of time and need to recharge even if they plan to continue upward in time. But for now bears held their ground. The intermediate term remains more bearish. Things are pretty simple on the NASDAQ chart as a move over the 50 day moving average would coincide with a move over our long term support / resistance line in blue.
“The SPX cleared short-term resistance last week, but we expect upside follow-through to be limited by short-term overbought conditions,” BTIG Chief Technical Strategist Katie Stockton said in a note.
Also worth noting the Russell 2000 rallied right into the 50 day moving average today before falling back.
The NYSE McClellan Oscillator entered the day extremely overbought… and it exited the day extremely overbought. It is difficult to get too bullish for the next few days with this sort of reading.
Oil is actually looking “somewhat” constructive for the first time in many months. After poking out of this 4 month downtrend it seems to be holding on. A few days in the low to mid $30s and it might be ready to make a march on the $37s area where there is a lot of resistance from December. If the market pulls back the next few days it will be interesting to see if oil can hold up. Falling back below $31 and staying there would be a negative.
“The fact that oil is up big and the market isn’t up big concerns me, but what’s going on is the market’s a little bit tired,” said Matthew Tuttle, chief investment officer of Tuttle Tactical Management.
Gold also continues to act in a positive fashion – as we said last week, it didn’t fall off a cliff during this rally in the indexes – and rallied sharply when indexes were in free fall earlier in 2016. The bullish “double bottom” in late 2015 was a good tell.
Valeant Pharmaceuticals (VRX) closed down 18.4% after Bloomberg reported Valeant is under investigation by the SEC. The firm also withdrew prior guidance, rescheduled its fourth-quarter earnings call and said CEO Michael Pearson was back from medical leave.
Signet Jewelers (SIG) jumped 9.4% after the company announced preliminary fourth-quarter earnings that exceeded expectations.
Icahn Enterprises offered to buy the rest of Federal Mogul (FDML). Shares of the auto parts maker soared 45.8%.
