An apparent reduction in tensions between Russia and the west have helped the market regain some confidence.

Introduction

Today the market got off on a good foot. The reports of Russian troops leaving the region bordering the Ukraine sent a wave of relief around the globe that started last week and carried around the world and into today. Asian markets, particularly the Japanese Nikkei, had their best day in months. The Nikkei gained 2.38% with other Asian indices doing about half that well. In Europe the relief was equally euphoric and sent those indices higher led by the German DAX 1.9% increase. Early trading here at home was equally positive with the major indices indicated about a half percent higher as the trading day began. The mood was aided by a round of semi positive earnings from some big names like Priceline and AngloGold.

Market Statistics

Although the bulk of earnings season is behind us this week is still relatively full with some high profile names on the list. Today was dominated by Priceline but there are others such as Wal Mart on Thursday. The earnings week is important for the consumer products sector of the economy as many big names are reporting. One reporting today was Sysco, beating on the top line and coming in line with expectations on the bottom. As for economic data there was none to be had today and the rest of the week is fairly light to. At the open the SPX moved steadily upward until hitting the early high at 11:20 just a hair shy of 1945. From there the index drifted back down to find support around 1937, about 4.5 points above last weeks close. Afternoon trading saw the indices tread water between the daily low and near term resistance.

Economic Calendar

The Economy

As per usual on Monday's there was not much in the way of economic data. In fact, there is not a whole lot for the week. Eyes are focused on Treasury Budget and the JOLTs report released on Tuesday. Wednesday US retail sales and business inventories will be followed by jobless claims and import/export prices on Thursday. Friday the week will wrap up with PPI, long term TIC flows, Empire Manufacturing and Michigan Sentiment. Friday being the most important day for data in my view.

Also as usual is the weekly Survey of Business confidence conducted by Mark Zandi and Moody's. This week's summary is much as it has been over the past few months, very upbeat. Again poking its head up is a small note of caution from European and South American businesses but US business remain “upbeat” with a positive view going into next year. Hiring also remains “robust” according to the report and is in line with recent NFP reports.

The Oil Index

Global oil prices were mixed in today's session. WTI gained about a half percent while Brent lost about -0.25%. Both traded in tight ranges as traders await this weeks inventory and economic data as well as how geopolitical events will play out. The Oil Index was mixed as well, first trading higher than last weeks close and then later in the day moving down into the red. The index was up about a half percent or more before meeting resistance at the 1650 level. This is the previous all time intraday high and long term resistance that has been in play for the last two months. Support is just below the current levels at the previous all time closing high. The indicators are bearish at this time but consistent with a test of support along the current levels. A break below 1625 could take the index down to the long term trend line along the 1575 region while a break above could go to 1700 or 1725 in the near term. The long term trend is still up and the index is still consolidating above long term support.


The Gold Index

Gold prices fell slightly today as Russian troops reportedly move away from the regions bordering the Ukraine. Prices fell about -$2 and traded in a very tight range as traders weigh the chances of this development leading to a reduction in tension or deteriorating into a new standoff as has happened before. Today's price action was just under the $1310 level and a previous area of resistance but the tight range shows that the market does not quite believe the news.

The Gold Index traded to the upside, in line with equities, and aided in part by earnings from AngloGold. The index gained more than 1% to trade in the middle of a long term resistance zone formed last year as the index broke out of the long term pennant formation. This formation and resistance level was later confirmed this year on a retest. The zone is between the $100 and $105 levels. The indicators are bullish in the long but declining and divergent while short term daily charts are indicating a weak buy. The long term trend is down but the near to short term is less clear. There are some signs of support over the last year, along the $85 level, but with the index 15% above that level there are also signs of weakness that indicate the index could retest that support. I think in the end it will come down to gold prices.


AngloGold Ashanti LTD reported earnings today. This is the largest gold producer operations on three continents and ten countries. The company reported a 17% increase in output based on improved operation and lower-cost production in two of its newer mines. Earnings, while reversing a loss from the previous comparable quarter, were still below expectations and largely driven by reduction in marketing and exploration expenses. On an all-in basis costs dropped -19% to $836/oz while average realized price fell roughly half that amount. Total production in the quarter totaled 1.098 million ounces and the company says it is on track to deliver the same results this quarter. All in costs for this quarter are expected in a range just above currently reported cost.

Basically, the company was able to increase production, primarily because of two new mines, and reduce costs, mainly through non-gold producing activities while expecting the average cost of gold recovery to remain at or slightly above current levels. My take, if gold prices remain at or near current levels AU should meet or fall slightly short of revenue and earnings expectations for the current quarter. Today the stock rose more than 1% in intraday trading but met resistance at the $18 level. The stock has been trading sideways for at least 12 months with indicators that support the same. A break above $18 could go to $19 before meeting resistance while a drop below the short term moving average could find support at $17. Obviously, an increase or decrease in gold prices would have an affect on earnings projections and remains a driver for the miners.


In The News, Story Stocks and Earnings

Priceline reported earnings today that beat expectations but revealed that plans for investment would impact earnings going forward. The market at first did not like this news but soon found reason to reverse the early sentiment. The company reported earnings of $12.51 per share versus an expected $12.09. This is on the back of an increase in bookings, a good sign for Priceline and the economy in general. The stock opened lower, traded lower, and then found support sending it back up to make a new five month high. The stock is above a potential support area with weak but bullish indicators. Longer term resistance is about 4% higher than the current levels near $1375.


Sysco, the largest food purveyor on the market, reported earnings in line with estimates on revenue that was slightly above the expectations. The company reported sales increases on a full year and quarterly basis with adjusted earnings per share of $0.50. In the report CEO is cited saying "While business conditions remained challenging for our customers, we experienced improving trends in year-over-year sales and gross profit growth in the last four months of our fiscal year.” The stock responded by trading 3.5% higher today, halting at a long term resistance line set by an interesting candle formation last year.


Sector Watch

Since there are so many consumer products companies reporting this week I thought the Consumer Staples ETF XLP would be a good choice to look at today. The ETF tracks companies ranging from Proctor&Gamble and Colgate to Coca-Cola, Phillip Morris, Wal Mart and CVS. The ETF has been active during the recent pull back and was active today as well. Today's action carried the ETF just over 1% higher to test the short term moving average before falling back from resistance. The indicators are just showing a strong trend following signal as MACD momentum is crossing zero with today's candle. Current resistance is at the moving average and above around $45 on a break. Earnings will be important for direction this week with Thursday as a potential focal point, the day Wal Mart reports.


The Indices

The Dow Transports led the rally today with a gain of 0.79% at the close. The index is bouncing from a recently regained support level but was halted by the short term 30 day EMA. The index is in mid bounce, from a long term trend line, and indicated higher in the near term. Momentum is still bearish but in sharp decline while stochastic is showing a weak bullish crossover. The index has been a leader of the market for some time and may be back. The index still faces resistance but it appears as the long term trend is taking over. It is at least offering some near term support.


The tech heavy NASDAQ Composite was runner up in today's rally. The index gained 0.70% in today's action, regaining the short term moving average and a long term support level. This is a good sign for the bulls and could lead to some follow through buying provided new events don't throw the market off track. The indicators are still bearish at this time but also still consistent with a test of support. There may be more sidewise trading but the long term trend is still up. Now that earnings are more or less over with the longer term risks include economic data with geopolitics still a concern in the near to short term.


The SPX and Dow Jones Industrials brought up the rear in today's race for gains. The SPX leading with 0.29% versus the Dow's 0.09% increase. The broad market S&P 500 gained a little over 5 points, at the close, with intraday highs 8 points above that. The index is continuing a bounce begun at long term support just above a long term trend line but was met by resistance along the 30 day EMA. The indicators are similar to the other major indices in that stochastic is showing an early, weak, trend following crossover while MACD is in in sharp decline from bearish peaks. This set up is stronger than other "weak" signals because price action is so close to the trend line but still needs a confirmation and secondary strong signal to get really bullish. It'll be three weeks before the next round of macroeconomic data unfolds, ending with the NFP. There is room on my chart for the index to move comfortably sideways until then. This is plenty of time for such a signal to occur should the market and the data warrant it. Near term risk is of course Putin, who could cause a drop or a pop depending on what he decides to do tomorrow or the next day.


Today's laggard was the blue chip Dow Jones Industrial Average. The safe haven of dividends was not enough to attract buyers looking for deals in more aggressive investments. The blue chips gained a mere 16 points in today's action, and like the other major indices, met near term resistance at mid day. The index fell from resistance at the previous all time high but I don't think this will prove too strong a level as it was broken down pretty thoroughly before. The indicators are in line with a trend line bounce with stochastic firing off the early and weaker trend following signal. On a longer term basis, the index is back above the long term moving average but still hampered by resistance. A break above 16570 could see the index retest recent all time highs.


Today the market rose on reduced fear. Reduced fear leaves the market open to focus on long term trends. Long term trends are still up with no sign of them diminishing. In fact, if the Moody's Survey of Business Confidence is any indication not only are trends good, they are strengthening and look good to continue on until the end of this year and into next. If this is true then the current trend line bounce is another great entry for short to long term positions. There are some concerns for the near term but for now they are just concerns. They could build into real threats for the technical state of the market but for now I don't see it happening. This week does not have much in the way of long term catalysts but you never know what bit information the market will grab onto. Be on the lookout for retail sales, PPI, Empire Manufacturing, Michigan Sentiment and on Thursday, earnings from Wal Mart.

Until then, remember the trend!

Thomas Hughes