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The markets traded up strongly almost all day. The "almost" raises the question of whether this really was the break-out everyone was expecting to signal resumption of the bull market. SPX closed at $1848, up $11, and RUT gained $10 to close at $1175. SPX traded up all morning, hit its high for the day at $1859 around noon ET, and then slowly declined in the afternoon. But the last half hour of trading was tough, slicing $8 off of the index. RUT behaved similarly, hitting a high of $1180, but closing down $5 from the high. Neither SPX or RUT are displaying a textbook shooting star candlestick, but they certainly have the essence of the shooting star with a strong bullish run higher, ending with the bears pulling the price back down. Trading volume was higher today with 2.8 billion shares of the S&P 500 stocks trading. Trading volume rose 10% on the NYSE and rose a tepid 1% on NASDAQ.
I look to higher than average trading volume to confirm whatever price move occurred. Today's action is not so clear. Does the increased volume underscore the strong move higher or the pull back late in the day? The one thing that is clear is that this wasn't the clean break-out higher that bullish analysts were wanting to see.
There wasn't any significant economic news propelling this bullish run today, so one has to wonder what tomorrow will bring? At least for the last half hour today, the bears were making their case. But one has to give the benefit of the doubt to the bulls. After all, they have driven this market all the way back from the 6% correction on February 5th in only 12 trading days!
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Markets appear to be hitting resistance and hesitating. Next week may show us the new direction: either a break-out to resume the bullish trend or continued weakness and possibly a serious correction. SPX lost $4 to close at $1836 while RUT gained $3 to close at $1165. SPX traded weakly sideways to slightly higher most of the day, but weakened around 2 pm ET. Then SPX fell out of bed during the last 30 minutes and closed at its lows for the day. Volatility remains relatively low at 14.7% on the VIX. Trading volume was unusually flat for options expiration with 2.3 billion shares of the S&P 500 stocks trading, only slightly above the 50 dma. Trading volume was unchanged on the NYSE and up 8% on NASDAQ.
RUT settled at $1167.71 and SPX settled at $1841.85. RUT settlement was not an issue for me this month since I had closed my Feb put spreads on January 24th as the market started its pull back and then closed my Feb call spreads on February 3rd as the market started bouncing back so strongly. The net result was a 7% gain in what I considered a tough month.
As I study the charts, it looks like we are hitting our heads on resistance. We may see the tipping point next week - a resumption of the bullish trend or perhaps a sideways consolidation pattern. Some analysts are still calling for an even more serious correction, but that seems less likely given this strong recovery from the lows on February 5th. We'll see.
Have a great weekend.
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The markets opened lower this morning but then continued their strong bounce back higher with SPX gaining $11 to close at $1830 and RUT closing at $1148, up $15. Volatility was essentially flat with the VIX coming in at 14.1%, down two tenths of a percentage point. Trading volume was mixed today as the market spurted higher. Trading volume dropped 1% on the NYSE and increased 11% on NASDAQ. As of 5:30 pm ET, the S&P 500 volume data was not available.
If you are looking for economic data to account for this bullishness, you will search in vain. Initial unemployment claims rose eight thousand to 339 thousand, but continuing unemployment claims dropped off by eighteen thousand. Retail sales for January declined 0.4%, even greater than the 0.1% decline in December - since we aren't allowed to mention Christmas any more, maybe everyone stopped buying gifts.
SPX is now about $20 from its all time high and RUT solidly broke out above its 50 dma at $1139. GOOG, NFLX, PCLN, TSLA, and FB all achieved all time highs today. Of these stocks, I think TSLA and FB are the most significant because their fundamentals just don't support these price levels. But that is one of the characteristics of a strong bull market - it doesn't have to make sense; just buy; it's going higher.
Needless to say, this market bounce worries me. SPX corrected 6.1% at its intraday low on February 5th, but that was only on Wednesday of last week and SPX has gained $92 from that low. Could we be setting up the classic head and shoulders reversal pattern? On the other hand, we repeated this same pattern several times last year, with a pull back of 4-5% and then a quick reversal back to make a new high. But I remain cautious. Maybe this time is different?
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I just returned from the International Traders Expo in New York. It was a great conference and it gave me the opportunity to meet many of you. Thank you for making the effort to contact me. However, the downside was that I was so busy that I didn't write a single blog while I was in New York. Well, I'm back. Is the bull market back as well?
SPX closed today at $1840, up $11. It was another of the now familiar reversal days, where all of yesterday's decline was recovered in just one day. RUT also surged higher, gaining $13 to close at $1162. But the price action of the past four days is interesting; SPX seems to be having difficulty breaking through $1840. Just after the first of the year, SPX was trading in the range of $1830 to $1840, before breaking out to set a new high on January 15th, and then beginning the correction that ended over 6% down on February 5th. But it has been straight up since then. RUT has been trading in a similar pattern, attempting to break out above $1162. Trading volume was pretty flat today with 2.3 billion shares of the S&P 500 stocks trading. Trading volume fell 6% on the NYSE and increased 2% on NASDAQ. So trading volume doesn't really help us validate today's upward move.
Markets opened weakly this morning based on the HSBC China purchasing managers' index falling to a seven month low at 48.3 for February. But then traders latched onto the Markit private manufacturing survey with a positive report of growth in U.S. manufacturing. I am a little skeptical of a survey I have never heard of suddenly causing the market to pop upward. Other economic data released today was weak to poor. Initial unemployment claims came in at 336k, down just three thousand, while continuing unemployment claims rose by 37 thousand. Even worse, the Philadelphia Fed survey came in at a -6.3 for February, down from a positive reading of +9.4 in January.
I continue to be tempted to take the contrarian view on TSLA. Fortunately, I have resisted the urge. It just continues to run higher. Maybe TSLA is the market indicator - we are heading higher whether or not it makes sense.
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After four intense days straight up, the markets took a breather. SPX was unchanged at $1819 while RUT tacked on another $3 to close at $1133. SPX delivered a classic doji candlestick, the sign of indecision. This often suggests that the bulls and bears are approximately equally matched; this could be a tipping point to break higher or lower, or it could presage a period of sideways consolidation. The good news for the bulls is that the break-out above the 50 dma appears to be solid. RUT came within a couple of dollars of its 50 dma intraday but pulled back to close lower.
Trading volume fell off with 2.2 billion shares of the S&P stocks trading; trading on the NYSE dropped 10%, but trading volume on NASDAQ edged up 2%.
There wasn't any market moving economic data today. Treasury reported that we are going broke at a slower rate (the deficit, or the increase in debt, is lower four months into the fiscal year). I suppose that's good news.
If you are looking for a return to the strong bull market of 2013, I think that signal will be SPX breaking out above the previous high at $1850. We are a long ways from that happening, but a three day spurt like we had recently would do the trick. But before I rule out further declines, I would like to see RUT solidly above its 50 dma. My best guess is for some sideways consolidation trading, but my crystal ball is a little smudged.
