After a few months of being range bound on the indexes – especially the Russell 2000 and the NASDAQ, this past week saw a significant improvement in short term technical conditions. This coincided with the celebration of the “longest bull market in history”.
Wednesday marked 3,453 days since the S&P 500 hit its low of 666 on March 9, 2009. Since then, the broadest U.S. blue-chip index has more than quadrupled in price terms. The current rally isn’t the hottest. The previous record S&P bull market that ended with the tech bust in March 2000 rose 417% over 3,452 days—far above the current rally’s 323%.
Few investors would have bet that the longest bull market in U.S. history would follow on the heels of the worst financial crisis since the Great Depression. A decade ago, storied investment firms like Bear Stearns and Lehman Brothers disappeared, while others including Merrill Lynch were sold under intense market pressure. Many analysts and investors believed in March 2009 that, even with broad market indexes down 40% and more from their peaks 18 months earlier, worse tidings were yet to come.
No surprise from the Federal Reserve minutes:
The Fed minutes indicated broad-based support for another interest-rate hike in September with many officials stating that as long as economic data remain strong, “it would likely soon be appropriate to take another step in removing policy accommodation.” However, they also suggested that any tightening will have to pause if the U.S. trade tensions with partners continue to escalate.
Fed head Powell’s speech at Jackson Hole was also more or less as expected:
Federal Reserve Chairman Jerome Powell said Friday that the central bank’s gradual path of interest-rate hikes remains appropriate as there does not seem to be “an elevated risk of overheating.” In his closely watched speech opening the Jackson Hole summer retreat, Powell said inflation has recently moved up near 2% but “we have seen no clear sign of an acceleration” above that level.
Economists define a “gradual” pace as one quarter-point interest rate hike per quarter. The Fed has penciled in two more rate hikes this year. Investors see a 90% chance of a move in September and a 60% probability of a rate hike in December.
Economic reports were not market moving. That said some nuggets from the housing market may be signaling a slowdown ahead…
On Thursday, data showed that existing-home sales fell to their lowest level since February 2016 in July, dropping a steeper-than-expected 0.7% from the prior month. That came on the heels of new home sales, which hit a nine-month low in July and was also weaker than analysts had been anticipating.
For the week the S&P 500 gained 0.9% while the NASDAQ jumped 1.7%.
Here is the 5 day weekly “intraday” chart of the S&P 500 … via Jill Mislinski.
American adults spend more than 11 hours per day watching, reading, listening to or simply interacting with media, according to a study released last week by market-research group Nielsen. That’s up from nine hours, 32 minutes just four years ago.
The week ahead…
“This coming week is the second-most-vacationed week of the year in the New York area (behind Christmas week), so we expect generally quiet markets (though upside momentum may well carry them higher into month’s end on Friday),” said Rick Bensignor, president of Bensignor Strategies.
“The S&P 500 closed in the green in April, May, June and July of this year, something that has happened in only 10 other years since 1950. In each of those years, stocks closed higher over the final five months of the year every time,” John Lynch at LPL Financial said.
Short term: Last week we said watch a potential double top on the NASDAQ but that it may be “too cute” that one had formed, considering we were looking at one on the Russell 2000 for a long time. Indeed it was too cute.
This double top in the Russell 2000 held the index in check for nearly 2 months. That ended Tuesday. Onward!
The NYSE McClellan Oscillator turned black the Friday prior to this past week – it held in all week. So bullish hats back on.
Long term: Still very positive for the “buy and never sell” crowd.
Charts of interest / Big Movers:
Monday, PepsiCo announced it was buying SodaStream (SODA) at an 11% premium over the prior Friday’s closing price.
Tuesday, home builder Toll Brothers (TOL) jumped 14% after it reported its third-quarter results and gave a full-year sales outlook.
Thursday, Sears Holdings (SHLD) slumped 5.9% after the retailer said it would close 46 more Kmart and Sears stores as its bricks-and-mortar business model comes under increasing pressure. The stock is down ~70% year to date!
L Brands (LB) sank 11% as the parent of Victoria’s Secret, Bath & Body Works and other brands, late Wednesday reported second-quarter earnings above expectations but cut its profit outlook for the year.
Friday, AutoDesk (ADSK) surged by more than 15% after it reported second-quarter earnings and revenue that beat expectations.
SunTrust Robinson Humphrey upgraded Netflix (NFLX) to a buy from hold. Pretty crazy that these type of upgrades still move people like lemmings to buy buy buy.
Hibbett Sports (HIBB) sank by more than 30% after the retailer reported second-quarter revenue and same-store sales that were below expectations. It also cut its 2019 profit outlook. Crazy chart the last week.
Have a great week and we’ll see you back here Sunday!