Central bankers and central bank policy ruled the day. Speeches and comments from ECB and FOMC members moved the market.

Introduction

So many central bank members had speeches or made comments today you might have thought there'd been a policy meeting. There was no policy meeting, merely a half dozen speeches from Federal Reserve officials including Janet Yellen, as well as some comments from the ECB's Mario Draghi. The gist of the story remains the same; the ECB is dovish, perhaps more dovish the revealed at their last meeting, and the FOMC is still on the hawkish side, aiming for a rate hike in the near, near future.

Draghi says that the ECB is looking at a wide range of instruments with which they could affect policy. He also says that core inflation growth was weakening, and that downside risk for the economy were clearly visible. On the FOMC front the market received remaiks fromYellen, Bullard, Lacker, Evans and Dudley, all of whom see us on track for rising inflation, tight labor markets and rising core inflation. As a whole they remain data dependent but Dudley hedged by saying the risks of moving to fast or moving to slow were nearly balanced.

It is still unclear if they will raise rates or not come December but they all seem ready to do so if the economy firms up, or shows signs it will firm up, and there is an entire cycle of monthly data between now the next meeting to sway their decision.

Market Statistics

Pre-opening trading was quiet, the market was largely waiting on the Fed remarks which were scheduled for different events throughout the day. Asian markets were largely flat although their was a surprise rally in Hong Kong shares, they closed with a gain near 2.5%. European shares began the day just below break even levels and slowly lost traction throughout the day. Traders were not cheered by Draghi's dovish stance, or not enough to rally anyway, driving the DAX down by just over -1% and other indices in the region down nearly -2%.

Futures trading here at home indicated a flat to slightly negative open for most of the morning. Fed speak and economic data did nothing to support the market and the trade slipped going into the open. The market began to sell off as soon as the opening bell sounded and moved lower by more than -0.5% within the first 15 minutes of trading. Early bottom was hit by 9:45AM, some sideways movement carried into the lunch hour when a new intraday was low hit, near -0.85% for the SPX. Another intraday bottom was hit by 12:30 and induced another 2 hours of sideways action lasting until late afternoon when another new intraday low was made. Selling continued the rest of the day and into the close leaving the indices near their lows for the day.

Economic Calendar

The Economy

There was not a lot on today's economic calendar but it remains positive and in support of labor market health. First up is the weekly jobless claims data. Initial claims held steady at last week's unrevised 276,000. This is slightly higher than the estimated decline to 270,000. This is the 2nd week claims have been at this level, a one month high, but they remain just off the 43 year low and trending at historic low levels suggesting low low levels of job turnover and loss.

The four week moving average of initial claims rose by 5,000 with this weeks data but also remains in down trend and near historic lows. On a not adjusted basis claims rose by 12.5%, in line with the 12.5% expected by the seasonal factors. Not adjusted claims are now down -6% on a year over year basis. Michigan and California had the largest increases in claims, 3,942 and 2,250, while New York and South Carolina had the largest decreases, -777 and -571.


Continuing claims rose 5,000 from an upward revision of 6,000 to 2.174 million. The four week moving average of claims also rose, by 2,250, but remains in downtrend and near historic lows, as does the weekly figure. The total number of claims rose 13,565 to 1.925 million. This is the 3rd week in gains in total unemployment but this number is also still trending lower, and just off the long term historic lows.


Today's bonus data was the monthly JOLTs report on job openings and labor turnover. This data is lagging, this report is for September, but nonetheless gives insight to the labor market. This month job openings rose by 0.1 million to 5.4 million and is approaching the all time high, a bar set just two months ago. This number was driven by a surge in openings among business & professional services, health care providers and retailers. The hires rate fell slightly, to 3.6%, while the quits rate held steady for the 6th month in a row at 1.9%. The decline in the hires rates is a concern and may reflect a lack of available employee's as indicated by some reports and comments I've heard. The quits rate is a positive, it shows employee's with jobs remain confident of finding a new, different or better job should the need arise.


Tomorrow is a big data day with at least 5 important data points. First up is PPI, followed by Retail Sales, Michigan Sentiment and Business Inventories. Within the retail sales will be data on the auto industry, which has been booming, and could give a hint into next week's auto sales data. Next week will be important data wise too, as if any week isn't, including Empire Manufactuing, CPI, Industrial Production, Home Builders Index, Housing Starts, Housing Permits, Philly Fed, Leading Indicators and the FOMC minutes from the last meeting.

The Oil Index

Oil fell to a three month low today on a huge build in US stockpiles and a pledge from OPEC they would keep pumping. US inventory data was release today because of the Veterans Day Holiday yesterday, thank you to all vets reading this. Today's data showed a build more than 4 times expected, 4.2 million barrels, and adds weight to the supply/demand imbalance. At the same time OPEC is gearing up for their annual meeting, scheduled for next month, and are standing by their view demand would grow in 2016 and that they were going to keep pumping. Basically, still no reason to bet bullish in oil so far as I can see.

The Oil Index lost more than -2.2% today in a move that broke below the short term moving average. The index is on the hunt for support with targets just below today's closing level, near 1,150. The indicators have rolled over into a bearish signal, confirming each other, so a move down to support looks likely. If oil prices continue to lose ground the index could easily break support with next targets near 1,100 and 1,050.


The Gold Index

Gold did not make much of a move in today's trade, I'd have guessed the combination of Dovish Draghi and the Fed's cautious hawkishness would have helped support the dollar and crush gold. The metal had a volatile day, at first trying to move higher and then falling to new lows, only to bounce back to near break even for the day. I remain bearish on gold, I see no place for the dollar to go but up, and gold to go down, in light of the opposing stances taken by the FOMC and the ECB. Today's talk has helped cement that view, the market may be waiting for more data and/or an actual policy change.

The gold miners are slipping along with gold. The miners ETF GDX fell nearly -3% at the open but was able to regain most of the loss, closing down -1.25%. The miners have yet to make a new low, unlike gold, but are fast approaching support at the long term low, set 3 months ago, just below $13. The indicators are bearish and support a move down to test the low but may also be indicating support will hold, or at least cause a consolidation or bounce. Stochastic is low in the range and pointing lower but extremely oversold, MACD is bearish and strong, but retreating from a peak, conditions that combined with support targets are a good indication a decline may be paused or stopped at this level. The caveat as always is gold and gold prices, if gold breaks support at the long term low this index will likely follow.


In The News, Story Stocks and Earnings

The dollar lost ground today in the face of hawkish sounding Fed members and increased dovishness from Mario Draghi. The Dollar Index fell about a half percent on an intraday basis but did not break support. The index appears to be in a consolidation, above support and below resistance, with bullish outlook and conditions. The indicators are bullish but showing near term weakness, consistent with resistance near the all time high. The index may continue to move sideways from here while the data rolls in, and possible up to the actual December FOMC and ECB meetings, unless the data is good and clearly supports economic health.


Retailer Kohl's was able to buck today's sell-off. The high end discount chain reported earnings this morning that beat expectations, $0.75 adjusted versus $0.69 in the prior year, driven on a 1% increase in gross sales. Shares of the stock jumped on the news, soaring more than 7.5% in the pre-market session and gapping up at the open. The move was capped by the short term moving average which provided today's resistance. This one may have hit a bottom, it will be interesting to watch in the coming weeks.


Cisco reported after the closing bell and beat on the top and bottom line. The technology provider reported EPS of $0.59 versus the expected $0.56 consensus estimate. Margins also improved but despite the positive numbers shares of the stock fell, dropping -2.5% in after trading on weak guidance. The stock is now in the middle of the 12 month range with bearish indicators.


Nordstroms also reported after the bell. The nation wide retailer of fashionable goods did not meet expectations. Comparable earnings came in far below consensus, $0.54 versus $0.71 expected, on light revenue and poor comp store sales increases. Comps were up only 0.9%, consensus was over 3%, and resulted in higher than expected inventory levels and a reduction in full year guidance. Shares of the stock fell on the news, falling more than -15% in after hours trading.


The Indices

The market fell again today, putting many of them back in negative territory for the year. Today's move extends the pull-back begun last week and has brought the market down to possible support levels. The move was led by the Dow Jones Transportation Average which lost -1.56%. The index was able to break below the short term moving average but did not yet set a new low. This could lead to further downside and is confirmed by the indicators which both created bearish crossovers with today's action. However, the move today does not have a lot of strength behind it and looks more like a continuation of recent market churn than an indication of severe correction. First support target is near 8,000 with a possible move to 7,750.


The Dow Jones Industrial Average made the next biggest decline in today's session, -1.44%. The blue chips also had their largest decline in over 6 weeks, coming to rest right at the short term moving average. This could provide support but it will be tested, the indicators are both bearish and pointing lower. MACD momentum is bearish, but very weak at this time and consistent with a pull back to support within an uptrend. The previous bull wave has some underlying strength, it made an extreme peak before winding down with two smaller peaks, so could easily retest the current 3 month high ifnot hit my target of the all time highs. Support for now is along the short term moving average with next target near 17,225.


The S&P 500 made the third largest decline, -1.40%, and broke below support and the short term moving average. The index could be moving down to retest the long term up trend line, broken last summer and regained last month, with downside target near 2,000. The indicators are both pointing lower in support of at least a test of today's lows, if not a lower low. However, as with the blue chips, this index showed us some strength with the rally and is indicated to retest its highs so pullback such as this are still buying opportunities.


The NASDAQ Composite made the smallest decline in today's session, only -1.22%. The tech heavy index fell below 5,050 but did not break below the short the term moving average. The indicators are bearish and pointing to a test of support but not showing much strength in that move. Support target is the short term moving average and just below that near 4,090. This index looks best set to retest its highs; not only is did the rally leading up to the 3 month high show strength, the peaks are convergent with the rally.


The market is pulling back and that is exactly what it looks like, a pull back and not a major correction. Today's action was largely an extension of profit taking begun last week, and partly a reaction to worse than expected earnings from the retail sector. It was also a reaction to central bankers and their view on the economy. The FOMC indicated they think the economy is on the brink of strong enough to warrant a rate hike, a move at once confirming economic strength and spurring fear the next crash is near.

The economic trends are positive and if spotty in places are gaining strength in others. The recovery has always been hurky jerky, moving first in one direction and then in another, and I don't think anything has changed; we're still in recovery, some things are going better than others.

At the same time earnings outlook is beginning to brighten. The 4th quarter is likely to be last quarter of negative earnings growth, if it doesn't turn positive by end of season, and beyond that projections become good, and then robust,through the end of 2016. All things that add up to rally in my opinion. I remain a bull and looking to buy when the dip is done.

Until then, remember the trend!

Thomas Hughes