Introduction

A resilient market weathered a host of geo-political events with calm. Today's news included an ECB meeting and policy statement, a general election in the UK and Comey's testimony before congress. Each held potential to move markets, none did.

International markets were mixed as the morning got underway. Asian indices were mostly flat ahead of the day's events with most indices moving less than 0.4%. The Nikkei was the laggard with a loss of -0.38%. European indices were cautious in the early hours ahead of the ECB meeting but mostly positive. The ECB statement was Goldilocks for the EU markets in that it maintains current low interest rate policy, did not make a move on tapering, increased forward GDP outlook and lowered inflation expectations. The DAX led with a gain of 0.32%, the FTSE fell -038%. Early results show Theresa May's Conservatives losing their overall majority but maintaining the lead as largest party of parliament.

Market Statistics

Futures trading was flat to up all morning, indicating small gains for the indices at the open. This level held in a fairly steady trade throughout the morning and into the close despite economic data, the ECB meeting and the start of UK polling. The open was fairly calm, the SPX opened with a gain near 1.25 points and proceeded to trade sideways in choppy action the remainder of the day. There was a push higher during Comey's testimony, when the market realized he wasn't going to Throw Trump under the bus, but it faded later in the day.

Economic Calendar

The Economy

Economic data was limited to jobless claims today. Initial jobless claims fell -10,000 from an upward revision of 7,000 to hit 245,000. The four week moving average of claims rose 2,250 to hit 242,000. Both numbers remain consistent with ongoing trends. On a not adjusted basis claims fell -8.4% versus an expected -4.7% and down -8.65% from last year, also consistent with ongoing labor market trends.


Continuing claims fell -2,000 to 1.917. Last week's figure was revised higher by 4,000 resulting in a net gain from the previous report. The four week moving average of continuing claims fell by -750 to hit 1.914 million and a new low dating back to January 1974. These numbers are also consistent with ongoing trends and further tightening of the labor market.

The total number of Americans receiving unemployment benefits fell -26,806 to 1.795 million, a new seasonal low and down -10.9% from this same time last year. This is also the lowest number of claims since early November of last year. Based on this number the total claims figure remains in downtrend and consistent with ongoing labor market tightening. The NFP may have been weak but job openings, job retention and hiring all remain strong.


Only one release tomorrow, Wholesale Inventories. Next week is another hot one in terms of data, look out for PPI, CPI, Retail Sales and a number of regional Federal Reserve Reports on top of the FOMC meeting Tuesday and Wednesday. The Fed is still expected to raise rates, outlook for the June meeting is sitting a hair below 100%.


The Dollar Index

The Dollar Index gained a little more than 0.25% to close just above the $97 level. Today's move is in response to the ECB meeting and policy statement which delivered far less than what some had hoped. The bank has decided to keep rates steady at 0.0%, they say rates will stay low far longer than the asset buying program and they said there was no talk of tapering. This now leaves the dollar set to rebound and especially if the FOMC is less dovish than they are expected to be. The CME Fed Watch Tool shows about a 50/50 chance of a third rate hike by the end of the year, anything to strengthen that sentiment should have the dollar moving higher. Support for the index is in the $97 range with indicators in support. Both MACD and stochastic have fired bullish crossovers which is consistent with support and rebound.


The Gold Index

Gold prices fell hard today as the dollar gained strength and political risk begins to dissipate. The ECB set the stage for today's drop by weakening the euro versus the dollar, the Comey hearings precipitated it as his testimony did little to incriminate Trump in grievous wrong-doing. A satisfactory conclusion to the UK elections will likely add to the move. Spot gold fell more than -1% to trade below $1,280 and could easily fall back to stronger support in the $1,250 to $1,260 range.

The Gold Miners ETF GDX tried to break out of its narrowing trading range earlier this week but the move is likely a whip-saw. The ETF gave up -2.25% in today's action and closing below my down sloping upper range boundary. The indicators remain consistent with range bound trading and showing signs of hitting resistance in the nearer terms. Resistance is near $23.80 and the 38.2% retracement level, support is along a the pair of moving averages near $23.00. A break of either will be significant and likely come in tandem or shortly after next week's FOMC meeting.


The Oil Index

Oil prices rebound from yesterday's massive sell-off but did not recover much of the losses. WTI gained nearly 0.25% at the close of trading to settle near $45.85. Prices are under pressure as global supply issues persist and demand outlook remains tepid. WTI may continue to fall without positive news. A break below $45 would be bearish and may take the market down to $40.

The Oil Index rose in today's trading but from a slightly lower open than yesterday's close. The index was able to post a gain but it was a small one, less than 0.10%. Price action remains below my support target at 1,120 and looks like it may go lower. The indicators are both bearish in support of lower prices with stochastic showing weakness with a cross below the lower signal line. Downside target is the bottom of last year's trading range near 1,080 with the caveat new resistance at 1,120 may be tested first.


In The News, Story Stocks and Earnings

Vail Resorts fell on a top and bottom line miss in the earnings report released this morning but traders may be missing the forest for the trees. Revenue missed consensus by 0.8% but still grew 22.7% over last year. The company reported a 26% increase in traffic which, offset by a 0.5% reduction in effective ticket prices, resulted in a 25% increase in lift revenue. Looking forward season pass sales for the upcoming winter are 10% above last year at this time. Shares of the stock dropped more than 5% in pre-market and early session trading but were able to find support along the short-term moving average.


Smuckers delivered a semi-sweet report that had shares trading higher in early pre-market trading. The company reported revenue and earnings above estimates with positive forward guidance but it turned out to be too little to justify the early move. The results come on a -1.7% decline in YOY revenue that will not be fully recovered for 2 years. Weakness in the US coffee and pet food segments are to blame. Shares of the stock gapped up at the open only to sell off hard during the open session to close with a loss of -1%.


The VIX fell in today's session, flirting with levels below $10.00. The fear index continues to trade sideways within a narrow range near the $10.00 with mixed indications. The indicators are both consistent with a low and declining VIX in the long-term but show evidence of support in the nearer term. Despite this there is still no concrete sign of bottoming or reversal. So long as this continues we can expect to see the major indices remain at current levels or move higher.


The Indices

The market was remarkably calm in the face of so many events. So calm in fact that there was nearly no movement on many of the major indices. The day's leader is the tech heavy NASDAQ Composite with a gain near 0.4%. The index created a small spinning top doji and set a new all-time high in the process. It continues to drift higher and looks as if it may do so into the near-term. Both indicators are bullish and pointing higher in support of higher prices, the only warning sign a bit of near-term weakness in the stochastic. Upside target remains 6,400.


The Dow Jones Industrial Average posted the 2nd largest gain today, just shy of 0.10%. The blue chips created a small spinning top doji just below the current and recently set all-time high with an upper shadow setting a new all-time intraday high. The indicators are a bit mixed but still consistent with an uptrending market. The stochastic is rolling over following a bearish crossover while MACD momentum remains bullish and on the rise. Depending on which indicator is leading which this set up is either a precursor to trend-following entry or the onset of resistance. A move higher with a break above the up trend line would be bullish, a fall from the trend line would be bearish.


The S&P 500 comes in third today with a gain near 0.05%. The broad market index created a small spinning top doji just below the current all-time high with a chance of moving lower. The indicators are both rolling over into what could become bearish crossovers and indications of lower prices or at least sideways consolidation. A move lower or sideways would meet support targets at the long-term trend line quickly, a break below that would be bearish in the near-term. A bounce from the trend-line, or move higher from current levels, would be bullish and trend following with upside target at 2,480.


The Dow Jones Transportation Average lagged today's market with a loss of -0.03%. The transports created a small spinning top doji just above resistance now turning support and looks like it could retest the all-time high. The indicators are bullish with stochastic set up for a trend following bullish crossover that may or may not develop. A move higher would be trend following and bullish with upside target at the current all-time high. A fall back below the 9,330 level would be bearish in the near-term with support targets along the short and long-term moving averages.


Market action over the past few days bears the look of consolidation within a near-term uptrend. Today's action was calm and quiet in the face of many potentially market moving events and a positive sign the rally could continue. All we need now is for the market to move to the upside and confirm. The UK election results may provide the catalyst and if not, perhaps one of next week's many events will be the one to do it. I remain bullish in the near-term but very, very cautious as we enter the summer trading season.

Until then, remember the trend!

Thomas Hughes