Introduction

Markets drift sideways in a vacuum of market moving news. G20 headlines, Fed-speakers and Congressional hearings pertaining to Russian involvement in US politics gave the market plenty to ponder but nothing concrete enough to move the market.

From theG20 front; rising concerns free-trade may break-down in the face of protectionism and a new buzz-word, "competitive devaluation", referring to the negative effects of currency war. In terms of Fed-speak there were two today and a total of 11 this week. This morning Neel Kashkari, a voting member, argued there was no reason to raise rates while core inflation, PCE, remained so low. This afternoon Philly Fed President Patrick Harker doubled-down on his view of economic strength and the need for gradual normalization. The big news, event rather, was the Congressional hearing on Russian tampering. FBI Director Comey says Russia did interfere, leaks within our government should be prosecuted to the full extent of the law and gave little detail on anything else.

Asian markets were mixed on G20 newsbites. Japan was down about -0.35, Chinese and other indices up about the same with more headlines expected from the China Development Forum over the next few days. The forum is a meeting of policy makers, international business people and organizations for the purposes of furthering China's development. Moves in Europe were just as small, if primarily to the downside, led by the the German DAX. In England stocks hovered closer to break-even, the FTSE closing with a gain of 0.7%, following the confirmation of the date for invocation of Article 50; March 29th.

Market Statistics

Futures trading was flat all morning with a slight dip into negative territory just before the opening bell. The open was weak, indices dipped into the red almost immediately, and then trend sideways until just after 1:30. At that time the indices dipped down to test intraday support and broke right through, hitting an intraday low before 1:45. The low sparked a rebound, indices moved up from there but found resistance at the just-broken intraday low. Resistance held and sent the indices back to the lows of the day where they languished into the close of the session.

Economic Calendar

The Economy

No economic data today and very little this week, or next week for that matter. This week Existing Home Sales on Wednesday, New Home Sales on Thursday, Jobless Claims also on Thursday and Durable Orders is all we get. Next week the biggest event will be the PCE data, due Friday, that Neel Kashkari spent so much time pointing to this morning. His view, PCE is well below target and a rise in rates won't spur business investment so why do it? The flaw in his logic is that a business-friendly administration has lifted sentiment and spurring activity within an already improving economy.

Moody's Survey Of Business Sentiment is unchanged in the last week at 33.8. This is the second week at a 10 month high. Mr. Zandi says that global business is strong and stable, responses to all 9 questions within the survey are upbeat.


We are in the earnings doldrums. There will be earnings releases from day to day, most days, and a few S&P 500 companies along the way, but no serious activity for several weeks. So far, 4 companies have reported for the calendar 1st quarter of 2017 and of those 2 beat revenue estimates and 2 beat EPS estimates. The blended rate for 1st quarter growth ticked higher with the data, rising a tenth to 9.0%. Based on the averages, providing earnings estimates are not more aggressive than they have been, we can expect to see the blended rate rise into the end of the quarter with a possible upside of 12%. Last quarter the final rate did not rise as much as expected but still gained a couple of points from the start to the end of the cycle.


Looking forward we can expect to see growth continue to expand into the end of the year and into next year. This year quarterly growth should expand to near 11% by the 4th quarter. Full year 2017 target is 9.8% this week, 2018 held steady at 12%.


The Dollar Index

The Dollar Index held relatively steady in today's session, closing with a gain near 0.1% after falling to test support at the $100 level. The index is caught in a swirling vortex of central bank policy and geo-political risk with little to move it over the next few weeks but headlines and speculation. Support is just below today's close, near $99.50 and the bottom of the 5 month trading range. A break below here would be bearish and may indicate a reversal. A bounce would be bullish but only in the near to short term, up to and until the next round of monthly data and/or central bank meetings, with resistance at $102 and $103.


The Gold Index

Gold prices continue to rebound on last week's FOMC stance, propelled higher today by G20 news and geo-political hotspots. Spot gold rose about $4 to trade just over $1233 and at a two week high. Upside resistance is just above today's close in a range up to $1250, a break above that would be bullish.

The gold miners traded flat today, the Miners ETF GDX gaining only 0.5% Recent price action suggests bullishness but that may be short lived. Short-term the ETF is in a range, following a down-trend, and near the mid-point of that range. The indicators are bullish and suggest a further move up but they are weak and there is resistance just above Thursday's high at the 38.2% retracement level. A move higher would need to break resistance to be bullish with an upside target of $25. A fall from this level may find support at $21.50.


The Oil Index

Oil prices fell -1.5% in today's session, reversing last week's rebound, to trade below $48. The three words that count right now are supply, production and capacity, all of which are at very high levels relative to demand and demand expectation. Until that changes I expect oil prices to remain under pressure, downside target near $45.

The Oil Index fell a quarter point to trade just below 1,180 today. The index is near the mid-point of a 12 month trading range with support at/near the 1,180 area. The lower half of the trading range is the trading range of last year, the upper half of the range is the break-out from that range driven by OPEC and their deal. Near term outlook remains mixed and driven by volatility in the oil market, short to long-term outlook is bullish and supported by earnings growth expectations. Even with the recent drop in prices the oil sector is still expected to see robust growth this year.


In The News, Story Stocks and Earnings

Shares of Transocean fell more than -2% on news it was selling 15 rigs to driller Borr Driller. The deal is worth $1.35 billion for 10 existing and 5 under-construction rigs comprising Transoceans entire jackup fleet. Analysts suspect the deal does not include full repayment of liability costs for the new builds which caused today's selling. Shares of the stock are now sitting on short-term support.


The once overly popular Jamba Juice reported earnings this morning and did not inspire much confidence. Sales and revenue missed for the 4th quarter and full year on declining comp store sales despite the addition of 75 new stores. Company CEO says 2016 was a year of transition and that they are on track to achieve their 5 goals for growth. Forward guidance is good, slightly above consensus estimate, but did not support prices. Shares fell more than -3% on the news.


The VIX rose slightly in the early morning session to open with a small gap. During the day the index fell-off, closing the gap but still ending the day with small gains. Despite this the index remains low and near the long-term low, trending sideways below $12.50 and consistent with bull market conditions. The indicators are weak. consistent with range bound trading and do suggest much movement within the broader market in the near term.


The Indices

The indices did a whole lot of nothing today. The open was soft, trading was without impetus and the session closed at the lows of the day. For the most part the indices closed with little to no overall movement with one exception, the Dow Jones Transportation Average. The transports fell nearly -0.50% to sit on support at 9,100. The indicators show some sign of support at this level but they remain bearish and weak. A break below this level would be bearish near-term with downside target near 9,000, a break below that would be bearish short term with target near 8,750. A bounce from this level would be trend following with upside target at the current all-time high.


The next biggest loser was the S&P 500 with a decline of -0.20%. The broad market created a small black bodied candle moving down to but not hitting near-term support. Today's action leaves the index near the mid-point of the near term trading range with bearish indicators. Downside momentum ticked higher and stochastic formed a bearish crossover suggesting that support will be tested. Support is near 2,355.


The Dow Jones Industrial Average made the smallest decline, only -0.04%, and created a small doji candle. Today's action is near the mid-point of the near-term trading range and looks like it will continue down to test support at the bottom of the range. Support is near 2,800, a break below here would be bearish in the near to short-term with downside targets of 20,500 and 20,000.


The NASDAQ Composite was able to eek out a small gain, 0.01%, and set a new intraday all-time high. The tech heavy index created a smallish doji candle, at the all-time high, and looks like it may continue to test resistance if not move higher. The indicators are consistent with a trend following swing in momentum that could lead to new all-time highs. If the index does not break to new highs and resistance is confirmed at this level the index will likely follow the broader market down to test near term support.


I think I mentioned this last week, it looks like the market has entered a holding pattern. Pick your reason, there just isn't any to support higher prices in the near term. It's about 5 week's until the next round of central bank meetings, the true onset of earnings season is still at least 3 weeks away and it's 2 weeks until the next important data. Until then expect the market to churn on day-to-day headlines, Fedspeak and geo-politics with a chance of near term correction. Longer term, looking forward, I am still bullish on the economy, earnings growth and the broad market, looking for the next bullish entry.

Until then, remember the trend!

Thomas Hughes