Introduction

Today's action was buoyed by optimism for the Trump agenda as expectations the GOP healthcare bill would pass gained strength. The vote was scheduled for today although no action as of this writing, sources say no vote tonight.

The implication is clear, if the President is able to strike a deal and get the bill passed it will reassure the market the rest of his agenda will pass, if not then not. More on that as it develops. Also in today's news; positive economic data and business news.

International markets were lifted on hopes for the Trump agenda as well. Asian markets were muted, European a little more exuberant, but both positive. There were few headlines from either region save updates on the UK terror attack, now being claimed by ISIS. Despite the event markets in Europe were able to put on roughly 1%.

Market Statistics

Futures trading indicated a positive open for most of the early morning. This was supported by rising hopes the healthcare bill would pass, some positive news on the earnings front and economic data although the trade turned flat before the opening bell. The open was weak, indices gave up marginal amounts, but support quickly stepped in. By 11AM the indices were firmly in the green and moving up to the highs of the day, hit just before lunchtime. The highs were held until 1PM at which time news out of Washington D.C. sent them back down to test intraday support at yesterday's highs. The news: Trump delivered a final take-it-or-leave-it deal to the Freedom Caucus, the final stepping stone to full(ish) GOP support of the healthcare bill. Late in the day news that there would be no vote tonight sent stocks to the lows of the day where they remained into the close of the session.

Economic Calendar

The Economy

Economic data was good, in particular the New Home Sales but first up is jobless claims. First time claims rose 15,000 on top of a +2,000 revision to hit 258,000. The four week moving average of claims rose 1,000 to hit 240,000. On a not-adjusted basis claims rose 1.3% versus an expected decline of -4.6% but remain lower compared to last year, down -2.5% YOY. This is the highest level of first time claims in over 2 months but still low relative to long term trends and consistent with labor market health.


Continuing claims fell -39,000 to hit 2.000 million, just off the long term 44 year low. The four week moving average of continuing claims also fell, -32,000, and is also just above its long term 44 year low. Both numbers are consistent with labor market health.

The total number of claims fell -98,740 to hit 2.391. This is the lowest level in 2.5 months and consistent with seasonal trend and long-term recovery in labor markets. Looking forward expect this number to continue falling into the spring/summer hiring season with a downside target below 2.000 million.


New Homes Sales was reported at 10AM and came in well above expectations. Sales for February were reported rising 6.1% month to month and 12.8% year over year. Analysts had been expecting a much more modest increase, near 1%. The February data is a 7 month high and well on the way to hitting a new post-financial crisis high.


The Dollar Index

The Dollar Index held steady near the bottom of the short-term trading range and a 5 month low. The index is in a zone of potentially strong support, near $100, and poised to make a move, most likely based on Trumponomic expectations. A bounce from this level could see the index move back toward the top of the range, first target is $102, a break below could go as low as $98 or $97. The results of the House vote on healthcare could be the spark to drive this move.


The Gold Index

Gold prices dipped -0.25% today but otherwise held steady near the recent high. Spot gold is now trading just below resistance targets near $1,250 with a chance of testing that resistance further. A break above $1,250 would be bullish for gold with an upside target of $1,300. If resistance holds gold may trend sideways within short-term ranges with support targets at $1,230, $1,220 and $1,200.

The Gold Miners ETF GDX fell a little more than -2.0%, closing with a loss near -1.0%, and appears to have significant resistance. Today's action created a medium sized black bodied candle with long lower shadow, confirming resistance at the 38.2% retracement line for the 2nd time since the FOMC meeting. The indicators are bullish but very weak and showing early signs of resistance. Looking back over the past 6 months it looks like the ETF is winding up within a range and is now sitting at/near the mid-point of that range ready to break in one direction or other. This move is likely tied to the dollar, as always, and by extension the healthcare vote and its impact on economic outlook, the FOMC and rising interest rates.


The Oil Index

Oil prices shed roughly -0.5% to set a new 3.5 month closing low. Prices are under pressure from supply, production and capacity for production which are all at long-term highs. Prices are likely to remain under pressure until some new bit of evidence leads the market to think or hope that demand will pick up or supply will somehow be cut. Downside target is $45.

The Oil Index held steady in today's session, posting a loss near -0.05%. The index is in process of bouncing from support at the top of last years long-term trading range and may be building a bottom from which to move higher. The outlook for the sector is mixed, near-term is weighed down by falling oil prices while longer term outlook for earnings growth remains positive. The indicators are mixed but promising, consistent with support and set-up to produce a strong buy signal should prices move up from here. The deciding factor will likely be oil prices, if they remain low or fall lower all bets are off when it comes to future growth. A break below support could go down to 1,075 and the bottom of last years range. A confirmation of support would face resistance targets at $1,200, $1,225 and $1,250.


In The News, Story Stocks and Earnings

Ford cut its guidance this morning on rising costs, lower sales volume, price competition, the impact of currency conversions and a handful of other factors in and out of their control. The company now expects adjusted earnings in a range 25% below the previously set guidance. Shars of the stock fell more than -2% in the pre-market session to open at a 4 month low. Support stepped in at these prices and drove shares up to recover a little more than half of the early loss.


Shares of Google continue to fall as the fall-out over ad placement spreads. A number of new companies including Verizon and AT&T have joined a boycott of the ad placement service raising new questions about this quarter's and future quarter's ad revenues. Shares of the stock fell a little more than -1.5% to hit a 2.5 month low.


Food maker Conagra reported a mixed quarter as ongoing efforts to build a better brand and profit base continue. Revenue, adjusted for divestitures related to the repositioning, fell a little more than -4%, more than expected, although margins and EPS continue to expand. Margins grew 180 basis points, adjusted EPS by 37%, both helping to support prices. Shares opened with a small gain this morning and moved higher although profit-taking set in as prices approached the all-time high.


Chip maker Micron reported earnings after the bell and beat top and bottom line. The company saw strong demand for its memory products drive sales and pricing. The results were well above expectations and led to revised forward guidance. The company now expects to see next quarter earnings come in nearly double current consensus, the news driving share prices up more than 7% in after hours trading.


The Indices

The indices tried to move higher in today's trade but just could not do it. The move was lifted on hopes the Trump agenda would move forward and later dashed by more delay. In the end today's moves were minimal and led, as usual, by the transports. The Dow Jones Transportation Average fell -0.57% creating a small black bodied candle with upper shadow. Today's candle is the second day of consolidation at this new low and looks like it may lead to a continuation of Tuesday's selling. Both indicators are bearish and showing weakness, consistent with an index moving lower. This, combined with price action, suggests a move down to 8,500 or lower is very possible.


The S&P 500 made the next largest decline, but only fell -0.10%. The index created a small doji candle with visibly longer upper shadow, consistent with resistance at current levels, that may lead to further downside. The indicators are increasingly bearish and confirm the possibility of lower prices with a downside target of 2,300.


The NASDAQ Composite also created a small doji candle and also looks like it could move lower in the near term. A break below near term support at 5,800 could quickly fall to 5,700 and possible 5,600 before hitting next solid support. The indicators confirm this outlook, MACD is converging with the latest low while stochastic moves below the mid-point of the range in a sign weakness.


The blue chips posted the smallest losses today, about -0.02%, creating a small doji candle near the bottom of Tuesday's range. This move appears to be a consolidation within a near-term sell-off and is confirmed by the indicators. Both MACD and stochastic with strengthening selling with a down-side target near the January trading range.


The market is wound up on a lot of expectations and a lot of those expectations are based on the Trump Agenda. This health care vote is seen as a proxy for the entire enchilada and has taken control of near term sentiment. Tomorrow's action is likely to be driven by more news on the vote, expected to occur tomorrow but who knows if it will be? I remain bullish long term, looking for the next great entry. In the near term I am bearish regardless the outcome of the vote because the chart signals are pretty strong. If I'm wrong, if the vote goes through and it passes, and the market moves higher, I may be changing my tune but that's for Monday's wrap.

Until then, remember the trend!

Thomas Hughes