Courtesy of Blain.
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Still no significant movement in the indexes but with moderate losses Wednesday and Thursday, the major indexes did put in a negative week of >1% which has been a rarity in 2017. Geopolitical events seemed to weigh on the market as the talk about tax reform / infrastructure spend seemed to be kicked out to the future. Earnings season also began as a trickle in the holiday shortened week.
“Geopolitical concerns have clearly been on the rise over the last week or so with Syria and North Korea never far from the front pages while it’s worth noting that we are all of a sudden now just 12 days away from the first round presidential election in France,” wrote Jim Reid, macro strategist at Deutsche Bank, in a Tuesday note.
We also saw some degradation in the S&P 500 chart which we will outline lower on the page; meanwhile the NASDAQ and Russell 2000 fell to key support levels. But it is worth noting the S&P 500 fell below the 50 day moving average for the first time since November 8th.
Transports are also looking salty…
Semiconductors – another economically sensitive sector, also broke a long trendline of support late in the prior week and then this past week broke down further; now below the 50 day moving average.
Retail sales for March were released Friday even as markets were closed… and they were meh.
Sales at U.S. retailers fell in March for the second month in a row, marking the worst two-month stretch in two years. Sales at retailers nationwide declined 0.2% last month, mostly because of cheaper gas and incentives by car dealers to drum up sales. Slower-than usual issuances of tax refunds may have also contributed to weaker spending in the early spring. What made the decline seem even worse, though, was a government update to sales figures for February that showed a 0.3% drop instead of a 0.1% increase as originally reported.
If autos and gas are excluded, retail sales rose 0.1% last month, the Commerce Department said. Department stores also registered a 0.2% increase in March, though sales are down 4.5% in the past year as they lose more and more ground to Internet rivals such as Amazon
Most economists expect retail sales to accelerate soon in light of high consumer confidence, steady hiring gains, rising wages and the arrival of most 2016 tax refunds.
Here is the 5 day weekly “intraday” chart of the S&P 500 provided by Jill Mislinksi.
Flip flop: Candidate Trump was eager to remove Yellen; President Trump seems to like her easy money policies. MORE PUNCH BOWL. Shocking that….
In an interview with the Wall Street Journal, Trump said he had respect for Yellen and said she was “not toast” when her term helming the central bank ends next year. “I do like a low-interest rate policy, I have to be honest with you,” Trump said in the interview.
Yellen is “the safest dovish choice” for Trump, said Vincent Reinhart, chief economist for Standish Mellon Asset Management in Boston and a former top Fed economist. One way around a collision between the Fed and the Trump White House is to have “a relatively accommodative Federal Reserve,” and Yellen is probably “the most market friendly person to deliver that,” Reinhart said.
Trump’s comments have completely changed the contest to be the next Fed chief, Reinhart said. “Now every candidate is going to be compared with how dovish they will be relative to Yellen,” he said.
Note: Liz Ann Sonders of Charles Schwab says the post election rally is not all about Trump.
The week ahead…
Other than existing home sales not much of interest on the economic docket next week. Eyes will turn to earnings season which will begin in earnest. Geopolitical tension may also stick around.
Index charts:
Short term: We have some interesting things finally happening. The S&P 500 fell out (to the downside) of our wedge, which is a negative. As mentioned above that is the first close below the 50 day moving average in a LONG time. The last few weeks we had mentioned on our charts 5800 was a support level on the NASDAQ and that was certainly clear as of the close last week! Obviously a close below that would not be a positive for the bulls.
The Russell 2000 has been stuck in this same range for all of 2017! We’ve marked 1340 on our chart for a long time as support due to the obvious range the index is in (in yellow). Again, that held true as of the close Thursday! Sets up an interesting test early next week.
The NYSE McClellan Oscillator remained solidly above zero for the prior 2 weeks so we could not put on our bear costumes; that changed late this past week so we can now put one leg in the suit!
Long term: Here are 5 year charts on the major indexes; if your trading timeline is measured in years rather than days or weeks, you remain in “sit and smile” mode. The NASDAQ has nearly 400 pts it could fall before a change in trend may be afoot, and the S&P 500 has well over 100 pts.
Charts of interest:
It was interesting to see 10 year Treasury yields break the 2.30% level Thursday; that had been the floor in 2017.
Gold popped…
Consolidation in the trucking business Monday as shares of Swift Transportation (SWFT) surged 24% following news the trucking company plans a merger worth $6 billion with Knight Transportation. Knight’s stock was up 13%. Knight (KNX) ended up giving nearly ALL those gains away by week end but Swift held onto some of them. That said it is interesting to see how downtrodden these stocks were in the post election rally.
Whole Foods Market (WFM) surged Monday on a Wall Street Journal report that activist investor Jana Partners LLC has built up its stake to 9% and is pushing the grocery chain to consider various strategies to revamp its business, including a sale.
Congrats if you held the lottery ticket known as RetailMeNot (SALE) as it soared 48% Tuesday on news that the coupon website has agreed to be acquired by Harland Clarke Holdings Corp. for $11.60 a share, roughly 50% higher than its closing price of $7.75 on Monday.
Not so good news if you held lottery ticket Cytori Therapeutics (CYTX) which plunged 35% Tuesday after the developer of burn treatments priced a stock offering at a deep discount.
We mentioned Blackberry (BBRY) on it’s spike a few weeks ago and we’ll mention it again as the stock surged 16% Wednesday, and hit its highest level since January 2016 after it won an $814.9 million arbitration case against Qualcomm (QCOM).
Have a great week and we’ll see you back here Sunday!
