Introduction

The ECB held rates steady and gave no indication QE would be increased, decrease or ended; the market didn't seem to care. The statement and press conference was a dud; Draghi revealed no new information, gave no hints to the banks direction and confirmed ongoing slow, sluggish economic recovery. In light of earnings season, today's economic data, the upcoming FOMC meeting and the election it is no surprise the market reacted the way it did. Add in the fact that tomorrow is OP-EX and there was plenty of reason for traders to sit back and wait.

Asian indices were mixed but largely positive in the overnight session, driven by positive US earnings. Japan led with a gain near 1.4% while indices in Hong Kong and China were more flat than not. European indices finished the day in positive territory after a choppy session. Anticipation for the ECB kept the indices near flat-lined for most of the day, until the release of the statement that is, at which time a quick dip to test for support was followed by a short rally which left them with gains in the range of 0.3% to 0.5%.

The ECB held rates unchanged and made no adjustment to their QE policies. At the press conference Draghi seemed to indicate both an end and no end to easing, saying first that "(current fiscal) policy can't stay in place forever" and then hedging that with comments to the effect that no discussion of ending QE or tapering QE has taken place, that is very unlikely there will be an abrupt halt to QE and that the bank stands ready to take whatever action is necessary to support the economy. In terms of outlook, he says inflation is still expected to rise at a gradual pace.

Market Statistics

Futures trading indicated a flat to positive open during the earliest hours of the electronic session but that changed following the ECB announcement and today's early data dump. By 8:45AM the indices were indicated to open with small losses in the range of -0.15%. Downside pressure persisted into the open of today's session, and into the session itself, driving the indices down by -0.3% in the first 15 minutes of trading. The next saw a bit of volatility, the bulls pushed the indices up and into positive territory shortly after 10AM but were not able to hold their ground. The market sold off again and fell to a new intraday low near -0.45% around 11AM. Those lows held, the market rebound from there and then hovered near break even the remainder of the day.

Economic Calendar

The Economy

There was a fair amount of economic data released today. First off, weekly jobless claims. Initial claims rose a little more than expected, +13,000, to hit 260,000. Last weeks figures were revised higher as well, up 1,000. The four week moving average of claims gained 2,250 to hit 251,750. On a not adjusted basis claims fell -2.3% versus an expected drop of -7.2% and are now up 1.3% versus this same time last year. More than likely not adjusted claims will fall back below last years levels as it has each this year it has risen above them. Regardless, this weeks data remains consistent with long term trends and ongoing labor market health.


Continuing claims rose by 7,000 to hit 2.057 million. Last weeks number was revised higher by 4,000. The four week moving average of continuing claims fell nearly -13,000 to 2.058 million, a new low dating back to July, 2000. All in all these number remain healthy, just off the long term 43 year low, and consistent with improving labor market health.

The total number of Americans on unemployment benefits continues to fall. This week the total fell -34,022 to hit 1.747 million, a new low. Based on historical and seasonal trends we can expect this number to fall for another week or two before hitting bottom. Later this fall expect to see the total number begin to creep higher as staffing levels get adjusted going into the end of the year. The data should peak out in late December/early January with a total near 2.6 million.


The Philadelphia Federal Reserve Manufacturing Business Outlook Survey was released at 8:30AM as well, indicating growth continues but at a slower pace from the previous month. The headline reading of 9.7 is the third month of expansionbut down from last month's 12.8. Within the report New Orders and Shipments both made sunstantial comeback's from the previous month, up 14.9 and 24 respectively. New Orders came in this month at 16.3, shipments at 15.3 although Deliveries, Unfilled Orders and Inventories all remain in contraction. Employment improved slightly but remains negative at -4.0. The 6 month outlook remains positive but fell -4.9 to 32.6.


Existing Home Sales and Leading Indicators were both released at 10AM, neither did much to bring support into today's market despite their bullish tone. Existing home sales rose more than expected, by 3.2% month to month and 0.6% year over year, although data within the report is less rosy. Average home prices rose once again, due to low inventory and high demand, while inventories fell. Economists at the National Association of Realtors are becoming more and more concerned about inventory levels describing them as poor and not improving. The worry at this time is that without an increase in new home construction home prices will continue to rise, inventories will continue to shrink and the existing homes market will crumble.

The Index of Leading Indicators gained 0.2% in September, reversing the -0.2% decline in August. On a trailing 12 month basis the Index is up 1.4% on balance. Economists at the Conference Board say the index is pointing to modest economic growth through the early part of 2017 at least. This months reading was largely influenced by employment and housing permit data. The Index of Coincident Indicators rose by 0.2% as did the Index of Lagging Indicator.


The Dollar Index

The Dollar Index gained some more ground today as the ECB confirms that, at least for now, it remains on a different path than the FOMC. The ECB is at the least maintaining QE while the FOMC is clearly through with it and on the verge of tightening policy for the 2nd time. The index gained close to a half percent in today's session and appears to have broken out of the flag pattern I highlighted yesterday. First upside target is just above $98.50 although targets derived from the flag pattern and flag pole put a target of $100.50 on this move. The indicators are bullish and consistent with rally, the one red flag I see at this time is that momentum is waning. Looking out over the next couple of weeks this move could easily continue so long as economic data does not completely derail rate hike expectations.


The Oil Index

Oil prices fell more than -2.25% today, reversing yesterday's gains and more. Nothing in the way of news came out today, the move driven on low expectation OPEC's deal will support oil prices longer term and profit taking. WTI fell nearly -$1.20 to hit $50.31. Prices may remain volatile going into November as there is some expectations OPEC will up the ante on it's production cap with an actual cut.

The Oil Index fell early in the day but managed to regain it by the close and post a small gain. The index gained 0.06% in a move up from the short term moving average and capped by the upper limit of the 7+ month trading range. The index is up at the top of the range on higher oil prices but capped by a lack of confidence in the long term bullish prospects; supply and production still outweigh demand. A break above the top of the range could be bullish but would require oil prices to remain at or near current levels at the least, if not rise. A simple move above 1,180 without strength or confirmation bears a high likelihood of being another whipsaw. The indicators remain consistent with an asset trading at the top of a range.


The Gold Index

Gold prices held relatively steady in today's trade, if a bit volatile. Spot prices were up in the early part of the session, about 0.25%, only to fall following the ECB decision on dollar strength. At end of session gold settled near $1267, down about -0.25%, and is likely headed lower under pressure from the rising dollar. Critical support at this time is near $1,250, a break of which could take gold down to $1,220 or lower.

The gold miners traded in similar fashion today, relatively steady if a bit volatile within the range. The miners ETF GDX created a very small spinning top doji just beneath resistance levels at the bottom of the October gap. The ETF may be setting up for another small move higher but resistance must be broken first. More likely it is consolidating below this resistance level, waiting to see which way the wind blows FOMC sentiment, the dollar, and gold prices. The indicators are bullish in the near term but also show an overbought ETF within a near term down trend. A fall from this level could take it down to retest support in the $25 range, a move higher would find next resistance at the top of the gap near $25.75.


In The News, Story Stocks and Earnings

Today was the biggest day for earnings so far this season, just shy of 100 reports were released and there were many top names on the list. Verizon reported before the bell, beating expectations but failing to impress investors. The company reported non-GAAP earnings of $1.01, 2 cents above consensus, and reaffirmed full year guidance above consensus, but investors were disappointed over declining year to year revenue and poor post-paid subscription growth. Shares of the stock fell more than -1% in the pre-opening session and extended that decline throughout the day.


The Walgreens Boots Alliance reported before the bell as well, delivering growth in both revenue and earnings but missing analysts expectations for both. Along with the miss the company gave full year fiscal 2017 guidance in a very wide range around the consensus estimate. Investors were cheered by the results nonetheless as future prospects for growth remain strong. Shares of the stock made a small gap higher at the open and then extended that gain to nearly 5% by the close of trading.


Dunkin Donuts also reported before the bell and delivered a mix bag of results. The company beat EPS expectations by a penny, missed on the revenue end, lowered full year revenue guidance, maintained full year EPS guidance, reported a 2% increase in US comp store sales, the opening of 115 new stores and a near -2% decrease in year over year revenues. Shares of the stock fell more than -5% in the pre-market session to open near $47.50 which has been confirmed as support.


After hours action was filled with market moving reports so expect to see some action tomorrow before the opening bell.

Paypal – Matched EPS expectations, revenue beat, customer counts up 11%, a credit card is on the way, guidance was positive but light. Shares fell -5%.

Microsoft - Beat EPS and revenue estimates driven by strength in the Azure segment which posted a 116% revenue increase. Guidance is favorable and the stock jumped 5.5% to hit a new all time high.

Boston Beer - Missed revenue and earnings estimates on accelerated slow down in the craft beer industry (I promise I'm doing my part to support it). Revenues fell shy by -14% on an 11% decline in barrels sold. Shares fell -3%. Sketchers - Missed revenue and earnings estimates despite 16% growth in global sales and 18% growth in global wholesales. The company is also predicting weak Q4 sales. Shares fell -15%.

Schlumberger - Beat EPS but missed on revenue. Shares held steady in after hours trading.

The Indices

The indices, they are still churning. Today's action was yet another day of listless, directionless sidewinding whose focus is fixed on events yet to happen. For the most part the market closed with little to no change, except for the Dow Jones Transportation Index which fell about -0.35%. The transports created a small black bodied candle wedged tightly between the top of the trading range and the short term moving average. The moving average may continue to support the index in tomorrow's session but the indicators are not strong so a break above the range does not look likely. The indicators remain consistent with range bound trading and are not showing signs of strength or direction. Resistance is near 8,150, support 8,000.


The Dow Jones Industrial Average fell -0.23% in a move that created a small spinning top doji within a narrow congestion band. The index is trapped between 18,000 and resistance in the range of 18,300 and is giving no sign of breaking out. The indicators are consistent with range bound trading and a market in balance with little to no momentum. This action could continue on into the near term while we wait to see what happens over the next few weeks.


The S&P 500 closed with a loss of -0.14%. The broad market created a medium sized doji candle, more spinning top than anything else, just below the mid-point of the September/October trading range. The index is also below the short term moving average which may act as resistance in tomorrow's session. The indicators are rolling over into a bullish signal but remain weak and consistent with range bound trading. Should the index move up above the moving average resistance would be at the top of the range, near 2,175. Support is near the bottom of the range along the 2,120 support line.


The NASDAQ Composite closed with a loss of -0.09%. The tech heavy index created a very small doji type spinning top candle sandwiched between the previous all time high and the short term moving average. The moving average has begun to move lower and may act as resistance tomorrow. The indicators are bearish and consistent with a weakening market, a break below support could take it down to 5,170 and last week's low. A break below that level would be more bearish and could take the index down as low as 5,000.


The Draghi/ECB catalyst has come and gone, delivering a dud, and is one more to check off the list as we await the upcoming election. Earnings, earnings outlook, economic data, the FOMC and rate hikes are all moot at this point. The election has shaped up to be a defining moment in US and global history, the results shaping our world for the next several DECADES if not longer. We've less than 3 weeks to go, and then the rest of our lives to live with the results. The market is scared, yet hopeful, not ready to commit to rally but not afraid enough to sell off. I remain cautious, hopeful, anticipating the next great secular signal.

Until then, remember the trend!

Thomas Hughes