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Just when it seemed that the bulls might be taking a rest, they come roaring back. SPX gained $13 to close at $2117 and RUT closed at $1243, up $9. Volatility continues to contract with the VIX dropping about a third of a point to 13.0%. Trading volume remains anemic with 2.1 billion shares of the S&P 500 trading. Trading was up 2% on the NYSE and up less than one percent on NASDAQ.
Over 90% of the S&P 500 companies have reported fourth quarter earnings at this point and about 75% have beat the analysts' earnings estimates. Concern about the strong dollar hurting the earnings of the multinationals appears to have been overblown. The Greek debt problem is certainly not solved, but traders seem to have moved on.
The pattern appears to be: 1) the bulls push higher, 2) bears present a "sky is falling" scenario, 3) markets trade sideways while we worry, and then 4) the bulls push higher.
Will Friday's jobs report be the next focus of worry?
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SPX opened the week at $2110 and closed today at $2106, down $6. It was slightly down, but in broad brush terms, it was a flat week. RUT lost $6 to close at $1233. The NASDAQ composite did the best of the major indexes, up about $11 for the week at $4964. Trading volume has been below average all week on SPX, ending the week at 2.1 billion shares. Trading volume was up 3% today on the NYSE, but unchanged on NASDAQ. The VIX opened the week at 15.1% and closed today at 13.6%, down 0.4 points today. So the market averages may be a bit flat, but traders aren't concerned. The bull market appears to be intact.
The second estimate of GDP for the fourth quarter came in at +2.2% today, down from the first estimate of +2.6%. Why can't we just get it right and report it once?
The Chicago PMI reported its lowest level since 2009 for February, 45.8, down from 59.4. Most analysts blamed the decline on the harsh winter and the West coast port strike. Pending home sales increased 1.7% in January, so the real estate market continues to be solid, but not too hot.
Stay warm and enjoy your weekend.
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Janet Yellen testified before the Senate Banking Committee today, and appeared to be reluctant to commit to raising interest rates too soon. Markets took that as good news and traded higher. But is it good news? It suggests the FOMC chair still doesn't feel confident about the unemployment picture and has concerns about a deflationary spiral similar to what Japan has suffered through the past several years. Most Fed watchers are predicting the first interest rate hikes in September.
SPX traded up $6 to $2115, but RUT was less enthusiastic, closing at $1234, only up $2. Volatility continued its contraction with the VIX falling almost a full point to 13.7%. SPX and RUT both set new all-time highs. The NASDAQ composite also traded higher, but remains about eighty points below its all-time high.
The Case Schiller housing price index published its December numbers today, +4.5%, up from November's +4.3%. The Conference Board's consumer sentiment survey came in at 96.4 for February, down from the exuberant 103.8. Are gas prices that core to consumer expectations? Maybe.
The bulls remain firmly in charge, although the charts seem to suggest some slowing of the charge higher. In any case, being bearish is very contrarian at this point.
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The markets continue to trade sideways to higher; today was one of the sideways days. But make no mistake; the bulls are in charge. SPX actually lost a couple of dollars to close at $2114, while RUT gained $1 to close at $1235. Trading volume was flat with two billion shares of the S&P 500 stocks trading; trading volume rose 3% on the NYSE and was essentially unchanged on NASDAQ (to be precise, up 0.2%). Volatility was also essentially flat with the VIX at 13.8%, up 0.2 points.
New home sales came in at an annualized rate of 481k for January, essentially flat with December's 482k. A few days ago, we saw existing home sales drop a bit for January, so this number is somewhat reassuring that a "meltdown" isn't occurring in real estate. And recall that the Case Schiller price index remains pretty high at 4.5%.
If we just study the price charts, we see that SPX broke out of the consolidation triangle pattern back on February 5th and has been trading higher ever since. Now it slows a bit, but the bullish trend is very much intact. It is the classic stair step progression of a bullish trend. Even Greece couldn't derail the bulls. And Yellen promises more easy money, so what's not to like? Farmers are loaded with common sense wisdom; I am reminded of their saying, "Make hay while the sun shines."
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Traders were largely on the sidelines today, probably waiting on Yellen's testimony before Congress. And it wasn't too surprising to see some pull back after such a strong day on Friday. SPX closed down $1 at $2110 and RUT was unchanged at $1232.
Trading volume was flat to down with 1.9 billion shares of the S&P 500 stocks trading; the 50 dma = 2.25B. Trading volume declined 7% on the NYSE and was flat on NASDAQ. Lower trading volume is normal after expiration Friday, but it is also consistent with traders taking a pause while waiting on Yellen's remarks. The market is anxiously looking for clues about when the Fed may begin to raise interest rates.
Volatility rose slightly with the VIX closing at 14.6%, up 0.3 points.
Existing home sales for January came in at an annualized rate of 4.82 million, down from December's 5.07 million.
I think it is safe to continue to play the bullish trend, but the higher the markets move, the more likely a correction becomes. Don't play without a safety net.
