The week that was…
Key economic reports such as the monthly employment data and ISM manufacturing and non manufacturing didn’t move the needle much this week and the infatuation with Deutsche Bank ended. However there were all sort of antics happening in oil, precious metals, and currency markets.
On the economic front, Monday was the release of the ISM Manufacturing report which showed a move back to expansion (>50).
The Institute for Supply Management said its manufacturing index rose to 51.5 last month after dipping into negative territory in August. Economists surveyed had forecast the index to total 50.6. Spending on construction tumbled 0.7% in August.
Thursday saw a gigantic jump in the ISM non manufacturing index to a reading of 57.1, up from 51.4 in August.
The biggest data point of the month is always the employment figures which came in at +156,000 last month, while the unemployment rate ticked up to 5% as more workers entered the labor market. Hourly wages grew 0.2%. This was a number everyone could live with – not too hot, not too cold so it still puts a Fed rate hike in late 2016 in doubt.
The U.S. has added an average of 178,000 jobs a month this year, down from 228,000 in 2015 and 251,000 in 2014.
Here is a 5 day “intraday” chart of the S&P 500 via Doug Short.
The week ahead…
Hopefully some of the obsession with central banks cease as earnings season launches. That said earnings have been woeful for quite a long time…
According to the latest FactSet calculation, third-quarter earnings-per-share of S&P 500 companies are expected to drop 2% from the third quarter of 2015, which will mean earnings will have racked up six consecutive quarters of decline.
FOMC minutes will be released Wednesday and with the constant obsession about what the Fed will do (when it usually does nothing but placate the market) it should be on the radar. Retail sales will be the key economic report to watch for.
Short term: The S&P 500 is back in a range bound wedge; the NASDAQ is going nowhere fast but is at least doing it over its 20 day moving average while the S&P 500 has been below its 50 day all week. Usually the 2 indexes are a bit more in concert but right now we have different stories in the 2 major indexes we watch.
The Russell 2000 is in a small downtrend; bulls would want to see a push out of the top of this range. 1200 remains a nice support level to watch; a break below that would be worrisome.
After teasing us with a move above 0, the NYSE McClellan Oscillator went firmly back in the red this week which once AGAIN puts us in a cautionary stance. This has been the case for most of the past 3 months.
Long term: To change things up this week we went with a weekly chart over 5 years. You can see both the S&P 500 and NASDAQ broke multi year downtrends in 2015. However that hasn’t led to any massive losses; just a lot of slog. The S&P 500 is battling with summer 2015 highs… the NASDAQ is a good bit above. Note the blue line on the NASDAQ chart which marks a downtrend line connecting highs of mid and late 2015; this is the same blue line in our short term NASDAQ chart and would indicate a key support level.
Charts of interest:
The 10 year bond had rallied to the 1.70% area ahead of the Federal Reserve meeting – then sunk anew once Janet Yellen did her dovish dance. This week however was very interesting as yields not only went back to levels of that week but surpassed them a bit and hit the 200 day moving average.
It was a week in free fall for the British pound, highlighted by a “flash crash” of sorts Friday. The steep tumble was sparked by U.K. Prime Minister Teresa May, who said in a speech about Brexit last Sunday that she plans on triggering the process of leaving the European Union in late March or early April.
The lower pound means great things for British multinationals though as the price of their produce becomes cheaper to buyers worldwide. The FTSE – full of multinationals – reacted in kind! BREXIT!
Crude oil continued to break out nicely this week. It is always difficult to truly trust the charts in this commodity since it’s so news driven but in this case it thus far is a heck of a clean move. If it continues up next week watch those highs of June in the $51s as potential resistance.
It was quite the week in precious metals as both gold and silver plunged to levels near their 200 day moving averages.
The sharp selloff Tuesday saw gold futures drop $43, their largest one-day dollar decline since June 2013, as the dollar strengthened. “The fall was a bear raid from Comex and prices were assisted by stop losses being triggered,” said Julian Phillips, a founder of GoldForcaster.com.
Twitter (TWTR) surged 2 Fridays ago on a report of a buyout. Mid week rumors were Disney would join the bidding war. Takeover rumors were refuted Thursday. Sadness ensued.
Have a great week and we’ll see you back here next Sunday!