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Thursday, March 28, 2024

Weekly Market Recap Feb 18, 2018

Courtesy of Blain.

BOO YAH! Now that’s more like it!  Your regularly scheduled non stop up market returned this past week with a “5 for 5” week (all 5 days up).  Three of those days were >1% so it was a return of the bulls.  That said to return to the “Trump market” we need to get back to almost no volatility and incremental up days of 0.3% or so 80% of the time.   We noted in last week’s recap the NYSE McClellan Oscillator was still VERY oversold so a “snapback rally” was still on the docket.  That was quite a snapback rally!  So the “easy part” of the bounce just happened – now we will see if we are going to return to a more volatile future or go right back to the sleepy market that tacks on a little 4 out of 5 days.

For the week the S&P 500 gained 4.3% in its best week since January 2013, while the NASDAQ ended up 5.3% in its best weekly percentage gain since December 2011.  Remember that strategist talking “death spiral” last week …. probably related to the people who said Brexit would mean the end of life on earth as we know it a few years ago.

“This is a year of recalibration. In January we recalibrated to higher earnings, and now we’re doing it for higher bond yields, which have been led by potentially higher inflation,” said Leo Grohowski, chief investment officer of BNY Mellon Wealth Management. “Market participants are correctly focusing on inflation, because a rise in inflation can preface an economic slowdown, or an increase in interest rates that could lead to one.”

Another stat about how ridiculous 2017 was in terms of volatility.

Less than halfway through February, the market has already matched the number of 1% moves seen over all of 2017.   Last year, there were four days with a gain of 1% for the S&P (not including sessions like Aug. 22, when the index technically closed 0.99% higher), and another four where the index fell by that degree.

As was tweeted by Willie Delwiche, an investment strategist at Robert W. Baird & Co., the current number of 1% moves is “in line with median experience over the past 20 years.” In contrast, “last year was the clear exception.”  According to the WSJ Market Data Group, the absolute daily percentage change for the Dow Jones Industrial Average was 0.31% in 2017. It was 0.3% for the S&P, and in both instances, that represents the smallest absolute daily percentage since 1964.

In economic news, inflation which has been on the mind for the past 2 weeks all of the sudden saw a report Wednesday that was relatively “hot” – but largely ignored as the bulls stampeded.

Inflation scares that were responsible for the stock-market tumble over the past few weeks made a brief appearance Wednesday with the release of consumer-price index data. But the main equity gauges recovered from the initial shock to trade higher.  The cost of rent, clothes, gasoline, health care and auto insurance all rose, contributing to the 0.5% jump in the consumer-price index. Core inflation, which strips out volatile food and energy prices, rose by 0.3%.  The year-over-year increase in the CPI was unchanged from December at 2.1%.   Analysts said stronger inflation data may force the Fed to be more aggressive in tightening policy, which can undercut buying in stocks.

Sales at U.S. retailers fell by 0.3% in January — the biggest drop in almost a year — largely because of declines at auto dealers and home centers. And a previously reported increase in sales in December was wiped out.

From below it’s 200 day moving average … to above it’s 20 day moving average, in just 4 sessions.  As goes Apple so goes the market (usually).   Warren Buffett’s Berkshire Hathaway raised its stake in the iPhone maker by 31.24 million shares to 165.33 million shares at the end of December.

After falling below $7K the prior week, the bitcoin is back in the $10K range.

Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski.

The week ahead…

Markets are closed Monday for the President’s Day holiday. (I mean seriously)  The Federal Reserve meeting minutes (released Wednesday) will get some attention this week as people will focus on any increased focus on inflation.  Again, most of this is a “reason” the market needed to stage some minor correction as it was immensely overbought.  But we’ll do the dog and pony show of “massive 2.1% inflation”.

While the bulk of earnings season is over, retailers report the month after most companies and this week we’ll get some big hitters like Walmart and Home Depot.

Index charts:

Short term: The S&P 500 bounced off it’s 200 day a week ago ago Friday and now sits between the 20 and 50 day.  The NASDAQ is already above its 20 day!

The Russell 2000 has an interesting situation going on where a shorter duration moving average (20 day) is looking to cross below a longer duration (50 day) moving average which is usually negative.  But who knows in the Trump market.

From VERY oversold to back to bull territory in 1 week.

Long term: The NASDAQ is the more interesting here since it such a clearly defined channel.  It dared to go to the middle of said channel — and now immediately has snapped back to the top of it.

Charts of interest / Big Movers:

Monday, CSRA Inc (CSRA) surged 31% after the government IT company agreed to be acquired by General Dynamics (GD)  in a deal that values CSRA at around $6.68 billion.

Tuesday, Under Armour (UA) surged 17.4% after the sports-gear maker posted stronger-than-expected revenue.

Watches are the new cryptocurrency! #BLOCKCHAIN Fossil (FOSL) surged 88% after the watch seller late Tuesday posted better-than-expected earnings and KeyBanc analysts hiked their price target.

Chipotle (CMG) rallied 15.4% after the burrito chain late Tuesday named a new CEO: Brian Niccol, previously the CEO for Yum Brand’s Taco Bell business.

Friday, U.S. Steel (X) rallied 15% after the Commerce Department recommended tariffs on major metal imports, including a 24% tariff on steel imports from all countries.

Have a great week and we’ll see you back here Sunday!

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