Introduction

The indices tread water near break-even after weaker than expected economic data raises fear of weak 1st quarter GDP. Both Durable Goods Orders and Pending Home Sales came in below expectations, adding to concerns the economy stalled in the 1st quarter, but neither giving sign of economic meltdown. As I've said in the past, GDP figures are rear-looking so not too important in the overall scheme things. What is important is if the economy is trending higher, and if the forward outlook remains positive, which it does.

International indices were generally buoyed by Trump's tax plan but not overly excited. Asian indices fared best, rising about 0.3% on average led by a 0.49% gain in Hong Kong. European indices were in the red right from the start as traders anxiously awaited the ECB's policy decision and press conference. The bank decided to keep policy unchanged citing downside risk but did make note of improvement within the region. At press conference he himself was positive on the EU economy but qualified his comment saying the ECB had not discussed removing QE measures. Indices in the region closed with losses in the range of -0.25% to -1.15% led by the FTSE International Index.

Market Statistics

Futures were fairly flat for most of the morning and ahead of the ECB announcement. Bias was to the upside however, lifted by earnings with volatility induced by the data. Going into the open the indices were indicated to post small gains which turned out to be roughly 2 points for the SPX. The first hour of trading saw the indices fall to break-even and bounce, the second hour saw them fall back to break-even and then dip below following the release of Pending Home Sales data. The low of the day was set just prior to noon but only about -0.1% below yesterday's close. A small rally formed going into the lunch hour that carried the indices back to the highs of the day, about +0.2%. The high was hit just before 1PM, marking the top of the day's trading range. The indices moved sideways from there, closing near the mid-point, but in positive territory.

Economic Calendar

The Economy

Initial claims rose by 14,000 to hit 257,000. Last week's figure was revised lower by 1,000 for a net gain of 13,000 from last week's report. The four week moving average of claims fell by -500 to hit 242,250 and is just off the 43 year low set a few month ago. On a not adjust basis claims rose by 6.8% versus an expected gain of only 1.3% and are down -1.4% on a YOY basis. Despite volatility in the data over the past 2 to 3 months, and the possibility that initial claims have bottomed, claims remain very low relative to the recovery and consistent with labor market health.


Continuing claims rose by 10,000 to hit 1.988 million, last week's figure was revised lower by -1000. The four week moving average of continuing claims fell by -16,000 to hit a new 17 year low. There has been some volatility in this figure as well but not as bad as with the initial claims. The long-term downtrend remains intact at this time, consistent with ongoing labor market recovery.

The total number of claims fell by -96,380 to to hit 2.081 million, the lowest level since last November. This drop is consistent with long-term and seasonal trends, and evidence of ongoing labor market health. Looking forward we can expect to see this figure continue to decline into the spring, setting a multi-year seasonal low near 1.80 million.


Durable Goods orders were positive, led by transportation equipment, but below expectations. The headline number came in at 0.7% for March versus an expected gain of 1.2% and down from February's 2.3%. Ex-transportation durable orders were down -0.2% in the month versus an expected gain of 0.4%. Shipments and unfilled orders both increased, led once again by transportation, but both also below expectations.

Pending Home sales dipped in March by -0.8%. Despite the decline however, indications within the report suggest that the market is still hot and/or heating up. The numbers were blamed once again to rapidly diminishing inventories of homes, a situation that sooner or later will result in more home-building. On a year over year basis the March number is up 0.8%, and also the 3rd strongest read in the last 12. First time home buyers continue to be priced out of the market as inventory numbers spur increased competition for houses along with rising prices.

The Dollar Index

The Dollar Index held steady and traded in a range nearly identical to that of yesterday's. The index was supported by a slightly weaker euro while the weaker than expected data provided some downward pressure. Today's action was at the bottom of the short-term range, testing support at the $99 level and managing to close above. The index is now waiting for the FOMC meeting next week for direction. Tomorrow's GDP announcement may cause some volatility but should not move the index much unless it sways FOMC sentiment too far in one direction. Looking to next week's meeting there is a chance they will be not be overly hawkish and could cause the dollar to weaken further. A fall below today's level would be bearish with downside target near $97. A bounce will be bullish with upside target near $100 and then $101.


The Gold Index

Between the data, the ECB and ongoing geopolitical concerns gold prices were a bit choppy today but held relatively steady near $1,266. The metal has now pulled back to support at the February high and is waiting for the next move. Fundamentals suggest to me that the risk is to the downside, the US is still on track for economic growth and a stronger dollar which should equate to lower gold prices. The risk is in the geopolitics which has already helped to inflate prices, and in next week's FOMC meeting. A fall below current levels would be bearish with downside targets near $1,250, $1,235 and $1,200. A bounce would be bullish with upside target near $1,300.

The Gold Miners ETF GDX fell nearly -2% despite stability in gold prices. The ETF created a medium sized black candle and is sitting on support just below $22.00. This support is the bottom of the short-term trading range and likely to be tested further. The indicators are both pointing lower with only the barest hints that support is present. A break below this level would be bearish in the near-term with the possibility of short to long-term decline. Downside targets are $21, $20 and $18.50. Should the range hold, resistances are near the short-term moving at $23.30 and the top of the range near $25.


The Oil Index

Oil prices fell today, shedding more than -1% in the process. WTI is now trading near $49 as supply, production and capacity continue to outweigh demand. Today's news included the restart of Libyan production which could add as much as 500,000 BPD to swollen markets and a big build in gasoline inventories, contrary to expectations of a draw. OPEC remains in the back ground, scheming to support prices I am sure, but until something changes oil prices are likely to remain under pressure with a possible move to $45.

The Oil Index continues to wallow at support while oil prices remain in turmoil. The index fell in today's session, losing more than -1% intraday, but managed to confirm support levels once again. Today's move touched support at 1,150 and created a small hammer doji, the 5th time this level has been touched in the past 2 months. Support is in a tight range near the top of last years trading range and has so far been confirmed by the indicators. At this time MACD and stochastic are set up for the weak buy signal, a signal that would confirm with a bounce higher from current price levels. I remain bullish on the sector due to long-term earnings growth outlook but wary in the near-term. A break below today's low would be bearish with downside target near 1,100, a bounce would be bullish but face resistance at 1,200.


In The News, Story Stocks and Earnings

Today was a big day for earnings both before the opening and after the closing bells. Ford reported a top and bottom line beat, but this is of course after they slashed guidance a month or so ago. EPS of $0.39 beat consensus by 3 cents on 3.7% YOY revenue growth. Shares of the stock jumped in premarket action but the gains were taken as a chance for profit-taking/capital preservation which caused shares to sink during the day. Ford closed with a loss near -1.25%.


UPS also beat on the top and bottom lines. The ubiquitous delivery service reported strong US and international results driving 6.2% revenue growth and 3.9% EPS growth YOY. Profit was hit by rising fuel costs, up 43%, but full year guidance was maintained. Shares of the stock opened with a small gain, dipped down to test support, bounced and moved back up to close with a gain near 1.25%


Comcast reported earnings that beat consensus by more than 20% and up 23% from this same time last year. Revenue came in strong as well, up 8.9% and also ahead of expectations. This was driven by a 10% increase in subscriber numbers and strength in the amusement park segment, NBCUniversal. Shares of the stock jumped to a new all-time closing high but created a wicked looking pin-bar in the process.


Earnings action was hot after the close as well. Reports from Google, Amazon and Starbuck top the list. Google and Amazon both reported top and bottom line beats, both fairly substantial, sending shares higher in after hours trading. Amazon gained more than 4.5% on strength in cloud, retail and just about everything they do. Starbucks reported in line with estimates on weak revenue on weaker than expected comp store sales. Shares of the stock fell more than -2.5% on the news.

Also from the tech front were reports from Microsoft and Intel. Intel beat EPS by a penny on as-expected revenue. Shares of the stock fell -2.5%. Microsoft beat by nearly a nickel on a revenue miss, news that sent this stock moving lower by -1.75%. The Indices

The indices were a bit choppy today, but in a very tight range. Te day's leader was the NASDAQ Composite with a gain of 0.39% and a new all-time high. The tech heavy index extended its bounce from the long-term trend line and looks like it could go higher. The indicators are both pointing higher following bullish, trend following, strong entry signals. Upside target is 6,100 in the near to short-term.


The Dow Jones Transportation Average came in second today, up 0.28%, but not setting a new all-time high. Today's action created a medium sized white bodied candle moving up from the support of the short-term moving average. The indicators are generally bullish but showing near-term weakness following the mid-week fall from resistance. A move up from here would be bullish but a break above resistance at 9,300 is needed for entry to new positions. A bounce from this level would confirm the double bottom reversal from the longer term 150 day moving average.


The broad market S&P 500 comes in third today with a gain of 0.05%. The index created a small spinning top doji just below resistance at the current all-time high. It appears set to move higher following a bounce from a long-term trend line but will need to move past resistance. The indicators are bullish following a strong buy signal earlier this week. A break above resistance would be bullish and and trend following with upside target near 2,465 in the near-term.


The Dow Jones Industrial Average made the smallest gain today, only 0.02%. The blue chips created a small doji spinning top just below the all-time high and appears set to move higher. The index has formed a small consolidation within a near-term uptrend that is confirmed by both indicators. Both MACD and stochastic are moving higher following bullish crossovers, consistent with rising prices. A break above the all-time high would be bullish and trend-following with upside target near 21,750.


Despite today's lackluster action the indices appear poised to continue the near, short and long-term rallies. They are moving up off of long-term support levels, supported by the indicators and driven by earnings. So long as the forward outlook for earnings remains intact, and nothing today has changed that, my outlook for the market remains bullish. I'm cautious for the near-term, there is still some resistance to break through, but firmly bullish short to long-term.

Until then, remember the trend!

Thomas Hughes