Investors suffered through two whole days of losses in a shortened week – but the indexes still gained on the week! Boo yah! Even a sharp reversal Tuesday (gap up, close at the lows) – which is usually negative short term – couldn’t stop the freight train. Earnings season kicked off in earnest. The government shutdown put absolutely zero fear into markets.
“I would characterize a shutdown as just the kind of political news that the market has demonstrated, over the past year, a willingness to ignore,” said Hank Smith, co-chief investment officer at Haverford Trust, which manages $8 billion.
The S&P 500 gained 0.9% for the week, while the NASDAQ jumped 1.0%.
Peter Boockvar, chief investment officer at wealth manager Bleakley Financial Group, called the market “extraordinarily stretched” in a note to clients, adding, “only a few times in history has the stock market been this overbought. We know from a variety of sentiment indicators how euphoric the environment has gotten.”
We are setting records everywhere:
The S&P 500 has now gone 395 sessions without a decline of 5%, an unprecedented length of time. The S&P is already in its longest-ever stretch without a 3% decline, a drop that is historically extremely common. A decline of such meager magnitude hasn’t occurred since Nov. 7, 2016. Goldman Sacgs called low volatility “the defining characteristic of the U.S. equity market in 2017.” The investment bank wrote the S&P 500 had a realized volatility score of 7 in the year, which is “ranked in the first percentile since 1930.”
At current pace of +5.1% for the S&P 500 YTD and +6.3% for the NASDAQ through 3 weeks, we are talking 80-100% type of annual gains! With no major draw downs of 3-5% to worry about. It’s like magic!
Industrial production rose 0.9% in December for the fourth straight monthly increase, the Federal Reserve reported Wednesday. The gain was above Wall Street expectations of a 0.6% increase. The Fed’s Beige Book Tuesday indicted that the outlook for 2018 “remains optimistic for a majority of contacts across the country.”
It was a rough week for crypto currencies as the action continues to be in “blockchain” rather than the currencies themselves, after a crazy December 2017. Bitcoin even briefly fell below $10K.
Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski.
The week ahead…
Obviously things are a bit overheated. But one could argue the tax gift D.C. gave to corporations justify this move as S&P 500 earnings are going to rocket as far fewer dollars will go to taxes. So a consistent P/E ratio on a much larger “earnings” leads to higher prices. The question is to what level I suppose.
More earnings ahead as some of the big shots will hit in the next few weeks.
Short term: I guess this is considering “resting and consolidating” nowadays….
The Russell 2000 held it’s breakout.
The NYSE McClellan Oscillator did go slightly negative. If that sustains it is a cautionary sign but what is caution nowadays – buy with 1 7/8 hands rather than 2 hands?
Long term: Unicorns and rainbows continue – again, now in extreme fashion. Look at that NASDAQ chart as this long term channel is busted away from. Stunning move actually.
Charts of interest / Big Movers:
Merck (MRK) jumped 5.8% Tuesday after the company announced positive results in a late-stage lung cancer trial.
General Electric (GE) slumped 4.7% Wednesday, extending steep losses seen in Tuesday’s session that came after the industrial conglomerate announced a fourth quarter after-tax charge of $6.2 billion and a $3 billion cash capital contribution to its insurance subsidiary that will grow to $15 billion by 2024. It sunk again Thursday… and Friday. They need to get into the blockchain business…
Alcoa (AA) slumped 7% Thursday after quarterly results missed Wall Street forecasts.
Home security company ADT (ADT) finished down 11.5% Friday, falling below its initial public offering price of $14. Should have put the word “blockchain” in their IPO documents and it would have opened at $50 and closed over $100!
The amazing move in emerging markets continues.
Have a great week and we’ll see you back here Sunday!