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Yesterday’s positive, but also rather weak, response to the FOMC announcement was interesting. On the one hand, you could take it as evidence that the bulls were still in control. But, it was definitely contained enthusiasm. As I mentioned in yesterday’s blog, it often takes the markets a day or two to fully digest the FOMC announcement. So, maybe today’s pull back was the “on further thought” reaction. And today's weak GDP report didn’t help.
SPX lost $19 to close at $2076. RUT closed down $14 to $1140. Trading volume rose again today with 2.7 billion shares of the S&P 500 stocks trading. Trading volume rose 3% on the NYSE and rose 12% on NASDAQ.
The first estimate of first quarter GDP growth came in at a meager +0.5%, positive, but certainly causing many to wonder about prospects of recession. Initial unemployment claims rose to 257k from 248k, but this remains in line with the flat trend of the past several months. Continuing unemployment claims dropped five thousand to 2.130 million.
I continue to believe this market will remain range bound for the immediate future, perhaps until after the election. Economic data simply don’t support a bullish path forward, even with the Fed supporting the market. But I don’t see the evidence for a new recession either (although today’s GDP data are a concern). We’ll see.
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The FOMC passed on this opportunity to raise interest rates. The announcement stated that while the U.S. economy is growing only moderately, the risk from global turmoil has been reduced. Most Fed observers seem to be expecting the next rate hike to come toward the end of the year. The news was taken weakly favorably by the markets with SPX gaining $3 to $2095. RUT rose $3 to $1154. Volatility continued to contract with the VIX dropping to 13.8%. Trading volume spiked up above the 50 dma today with 2.6 billion shares of the S&P 500 trading. Trading was higher by 15% on the NYSE and rose 5% on NASDAQ.
SPX is nearing the "fish or cut bait" stage. November's high at $2110 and the all-time high at $2131 are nearby and support has formed over the past couple of weeks around $2075 to $2080. The price trend seems to have slowed as SPX approached these previous highs. Today's Fed announcement didn't supply the energy to drive the market strongly higher. However, it is true that market reaction to FOMC announcements often take 24 hours to "gel", so we will see what tomorrow brings.
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Trading volume dropped off significantly today with two billion shares of the S&P 500 stocks trading, well below the 50 dma at 2.5B. Trading dropped 10% on the NYSE and declined 22% on NASDAQ. SPX traded as low as $2078 before recovering to close at $2088, down $4 on the day. Today's trading reinforced the $2080 level as support for SPX. RUT fell nine dollars to $1138. Volatility rose a full percentage point with the VIX closing at 14.1%. This is probably due to additional hedging ahead of the Fed announcement Wednesday.
New home sales dropped from an annualized rate of 519 thousand in February to 511 thousand for March. Real estate isn't booming, but it is far healthier than many sectors of the economy.
Will the FOMC raise interest rates at this meeting? Or will they use this announcement to prepare the market for an interest rate hike in June? In either case, we may see the market pull back in reaction. Much of the downside push in January came from the silly analysis that suggested four rate hikes in 2016 (I say "silly" because those analysts drew that conclusion from the economic projections for the next 12 months made by committee members. Since when do we take economic forecasts seriously?)
The FOMC meeting begins tomorrow but the announcement won't come out until Wednesday afternoon. I would be surprised if we see much trading volume or price movement tomorrow. Traders will probably just be waiting on the Fed...
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Markets continued to trade quietly on lower volume as traders focus on the FOMC announcement due tomorrow afternoon. SPX gained $4 to close at $2092, but RUT gained $13, closing at $1151. Volatility was flat with the VIX virtually unchanged at 14%. Trading volume remains below the 50 day moving averages (dma), but rose a bit today with 2.2 billion shares of the S&P 500 stocks trading. Trading volume rose 7% on the NYSE and rose 15% on NASDAQ.
Markets are holding up rather well as the uncertainty of the Fed's actions weigh on traders. That tells me the general mood remains bullish. Absent a surprise from the Fed tomorrow, we are probably headed higher once again.
Durable goods orders came in higher by 0.8% in March, a big improvement from February's 3.1% decline that spooked the markets. The Case Schiller housing price survey continues to post annualized price increases above 5%, with 5.4% for February. The real estate market may not be booming, but it isn't declining. The Conference Board's consumer confidence survey reported at 94.2 for April, down a bit from March's 96.1.
Members of my trading group sold a weekly iron condor on CMG today in advance of the earnings announcement this evening. Based on after hours trading, this trade looks like it may gain 35% or more tomorrow. Join us at our next meeting on May 5th.
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Fresh from filing my tax return, I am greeted by an article today telling me 45% of Americans pay zero taxes. Is that their fair share?
Markets appear to be slowing as they enter the neighborhood of all-time highs. SPX continued to rise today, tacking on $6 to close at $2101. RUT only gained a dollar, closing at $1140. NASDAQ lost $20 to close at $4940. Trading volumes picked up with 2.3 billion shares of the S&P 500 companies trading today. Trading volume rose 6% on the NYSE and also rose 9% on NASDAQ. Trading volumes on SPX and the NASDAQ Composite remain below the 50 dma.
Housing starts came in at an annualized rate of 1089k for March, almost flat with February's 1194k. Building permits were right in line with 1086k, up from February's 1177k.
Passover begins Friday evening and the markets have historically softened just before Passover, according to the Stock Traders Almanac. Perhaps a large number of traders close positions to take their profits before taking off for the holiday.
So far, the markets have chosen to ignore most of the bad news coming out of the earnings announcements, but that may not last long. We also have a FOMC meeting coming next week. That may start to give traders pause.
