The market struggled for gains today as we wait on a round of monthly data, comments from FOMC members and the end of the 1st Quarter 2016. Market volumes were very light today, domestically and abroad, as many investors are still on Easter holiday. On tap this week, two scheduled appearances by FOMC members, Janet Yellen tomorrow and Dudley on Thursday, and lots of economic data. The big event of the week will likely be the NFP report on Friday although there are several releases with market moving potential.

International markets were fairly quiet. Asian indices ended their day mixed, the Nikkei was able to make gains on a weaker yen while indices in China closed with small losses. The major mover of those markets today was uncertainty towards the FOMC; the official statement said rate hikes would be slow in coming, Fed-speak last week seemed to be contrary to that position. Most European indices were closed today due to the Easter holiday.

Market Statistics

Futures trading was quiet this morning but tended to point to a higher opening for the US markets. There was little news out of the international sector and very little in the way of earnings but there was a bit of economic data, namely personal income and spending, to help support the trade. Going into the opening bell the S&P 500 was indicated to open with a gain of about 0.2% and this is what happened. There was a brief surge in the opening minutes that took the SPX up by about 5 points but the bears stepped in almost immediately to cap the move and send the index back to break even. The rest of the day saw the indices hover around break even levels, up a little down a little, into the close of trading.

Economic Calendar

The Economy

There was some economic data today, much more than we usually get on a Monday, but none was strong enough to move the market in one direction or another. The first release was Personal Income and Spending at 8:30AM; personal income rose by 0.2% while spending increased by 0.1%, both as expected. What was not expected was the downward revisions to January figures which shaved -0.4% off of the PCE.

Pending Homes sales was released at 10AM and came in much better than expected. Pending sales increased by 3.5% in February although January figures were revised down to -1.5%. The February figures are the highest level of signed contracts to buy homes in 7 months and the 18th month of positive year over year gains.

Moody's Survey of Business Confidence gained 0.2% this week to reach 30.7%. Business confidence seems to have stabilized since hitting bottom earlier this year but remains depressed compared to the highs hit last summer. In his commentary Mr. Zandi says that although the index is down from the high confidence is high by historic standards and indicates an economy expanding above potential. He also says that responses have firmed up a bit and that responses to all questions have seen improvement.

According to FactSet 10 S&P 500 companies have reported 1st quarter 2016 results so far. Of those 9 have beaten earnings estimates while only 5 have beaten revenue estimates. The blended rate for Q1 earnings is now -8.7%, down a few tenths from last week, due to downward revisions in all 10 sectors. Energy remains the weak spot and is estimated to post negative earnings growth near 99%.

Estimates for the full year continue to decline as well although there is some sign that 3rd and 4th quarter estimates may be bottoming. 2nd quarter estimates fell by -0.2% to -2.4%, 3rd quarter estimates fell by only -0.1% to 3.9% and 4th quarter estimates held steady at 9.0% for the third week running. While not an overly bullish sign this may be indicative the end of the earnings recession we've all been waiting for could be at hand.

Slightly more bullish is projections for 2017 earnings growth, up 0.1% to 13.4% and the third week of increase. We've still got at least one more quarter of weak earnings growth to contend with but it is looking more and more like the 2nd quarter will be the last quarter of negative growth, and could even be the first quarter of positive growth.

Due out later this week is Consumer Confidence, ADP employment, Challenger Job Cuts, weekly jobless claims, PMI, Auto Sales, NFP, unemployment, Hourly Earnings, ISM and Construction Spending. Job creation is expected to remain steady to strong this month with NFP in the range of 200K to 225K and unemployment holding pat at 4.9%.

The Oil Index

Oil prices fell -1% in today's session but held above $39. Supply and demand fundamentals are still decidedly bearish there is support from a weaker dollar and hopes for production cuts and/or supply/demand rebalancing. Also impacting today's trade were a couple of warnings from banks such as Barclay's and Maquarie which warned that prices could return to the mid $30's or lower. The upcoming meeting between OPEC and non-OPEC members to discuss production caps could lend support to the market but this may be a buy the rumor, sell the news scenario unless an actual change to the fundamental outlook is achieved.

The Oil Index fell about -0.85% on the fall in oil but remains above target support levels. Today's action took the index down to the 1065 level with weakening indicators. Both MACD and stochastic have turned bearish and point to at least a testing of support along the 1050 level if not a move lower. A break below 1050 and the short term moving average could take the index to next support target near 1020 or lower, to the most recent up trend line near 950.

The Gold Index

Gold prices hit a one month low this morning on the heels of last week's confusing Fed-Speak, and bounced from that low. Last week, multiple members of the FOMC, many of whom are non-voting members I might add, made the case for more aggressive rate hiking, contrary to the “official” FOMC policy and sent the dollar shooting higher. Today's data did not support that view, income and spending increases were tepid and offset by downward revisions to previous data, and helped to depress the dollar and support gold prices. Today's trading saw spot gold hover around $1218 and above the $1200 support level.

The Gold Miners ETF GDX fell nearly -2% with weakening indicators but remains above $19 and the short term moving average. The ETF appears to be consolidating in the range between $19 and $21while waiting on cues for the future. This week's data could be a big mover of gold, particularly if it does not lead the market to anticipate aggressive rate hiking this year. A break below $19 would be bearish and could take it down to the $17 level, first target for resistance is near $21.

In The News, Story Stocks and Earnings

The Dollar Index fell today, tepid data seemed to trump rate-hike expectations inspired by last week's Fed-Speak. Today' action saw the index fall about -0.3% from resistance in a move that appears to be trend following. The near to short term trend is down, driven by a less-dovish than expected ECB and a more-dovish than expected FOMC, with a down side target near $94.50. Later this week there will be at least 2 speeches given by Fed members and a lot of data. Any upward move driven on Fed Speak will likely be short lived unless the data supports the view of aggressive rate hiking.

Egg producer Cal-Maine reported earnings this morning, beating earnings but falling short on revenue. Earnings rose by 26% on higher egg prices in the wake of last years avian flu epidemic. The epidemic devastated producer flocks, flocks that have not yet recovered. The revenue shortfall was due to egg prices coming down from a peak set last fall. The company has not yet been impacted by the epidemic, centered in the upper midwestern region, except in increased costs of monitoring for the disease. Within the report specialty eggs, cage free etc, made up more than 25% of volume and 31% of revenue. Shares of the stock responded well to the news, jumping nearly 10%, but are still trading near the middle of a 9 month trading range.

The battle for the future of Yahoo! took on a new twist this weekend as Microsoft added their 2 cents to the conversation. The internet and PC giant has said that it will help back any company interested in making a deal for Yahoo although it does not want to purchase the ailing search engine itself. The move is thought to be a bid to ensure that whomever does purchase Yahoo will remain favorable to Microsoft once the deal is done. Shares of MSFT fell by about -1% while shares of Yahoo gained about 1%.

There will be some changes made to the S&P 500 after the closing bell tomorrow. Hologic, maker of medical devices, will move up from the Mid-Cap 400 to the S&P 500 replacing Pepco. Pepco was bought out by Exelon. Pepco is, or was, an energy holding company so this replacement will alter diversification in the S&P 500. Also being added to the SPX is Centene, a company which provides managed care for Medicaid recipients, replacing Ensco. Ensco, another energy company, will be moved down to the Mid Cap 400. Expect to see some buying in both Hologic and Centene tomorrow and the following day as managers and ETF's move to make adjustments in their portfolios.

The Indices

The market was mostly flat in today's low volume thin trading session, with one exception; the Dow Jones Transportation Index. The transports fell by nearly a full percent, -0.92%, and created the largest candle in 5 trading sessions. The index appears to be falling back to support near 7,700 and this level could be easily reached. The indicators are mixed, momentum is on the rise but rolling over while stochastic is on the rise but making a bearish crossover, so the strength of the pull back is yet to be seen. A break below 7,700 would be bearish in the nearer term and could lead to a test of the 7,500 level.

Today's other declining index was the NASDAQ Composite which lost only -0.07%. The tech heavy index created a small bodied candle with weakening indicators that point to a test of the 4,750 level. The indicator have been showing weakness all month in the form of divergences that may be setting the index up for correction. A move to 4,750 may create a bounce, if not and support is broken next target for support is near the short term moving average at 4,690. Both indicators are rolling over, not necessarily a bearish signal during a rally but definitely one that bears watching, as well as tight stops.

Two indices were able to post gains today, however small, led by the S&P 500. The broad market eeked out a gain of 0.09%, creating a very small spinning top type doji candle. Today's candle is indicative of a directionless market, today caused by low volumes and anticipation of a heavy weak of data. The indicators are bullish but appear to be rolling over into bearishness, not surprising given the 13.5% gain the index has made over the past month, and could lead to a test of support. First target for support is near 2,020 with next target near 2,000 and the short term moving average.

The Dow Jones Industrial Average made the smallest gain in today's session, about 0.06%, and also created a small spinning top doji candle. Today's action held the 17,500 level but the indicators are weakening and point to a possible pull back to stronger support levels, both MACD and stochastic are rolling over into what could become a bearish signal. First target for support, should 17,500 fail, is near 17,200 with a second target near 17,000 and the short term moving average.

Trading was quiet today due to light holiday volumes but even without that I think market action would've been directionless, what with the end of the quarter in two days and the massive round of data scheduled to come out this week. Regardless, it looks like the market may be topping out, or has at least reached a point of consolidation, after the rally we've seen over the last month. The indices have made some substantial gains in that time and profit taking is surely on the minds of fund managers, and anybody else active in the market.

Additionally, earnings outlook may also be setting us up for another pull back to stronger support levels. Nearer term outlook, Q1, is for another decline in earnings growth, a decline that I just don't see sparking a rally. The flip side is that once we get past this cycle the earnings outlook picture begins to brighten and could easily bring the bulls back to market.

I remain bullish for the long term, cautious in the near, and waiting for earnings growth to return to the market.

Until then, remember the trend!

Thomas Hughes