The indices hover near all time highs as profit taking caps near term gains. Selling wasn't frenzied, there wasn't a lot of downside volume and buyers stepped in on the dips. All in all a decent day of consolidation following four days of rally.

International markets were much the same. Asian indices closed mixed, Japan was down but China set a new 18 month high. European indices were more muted, most closing lower, although losses were minimal. Investors in both regions cautiously watching the US rally, economic data, domestic political turmoil and Donald Trump.

Market Statistics

Futures trading was negative right from the start and a round of stellar economic data did nothing to change that. The indices were indicated to open with small losses, near break even in most cases, with the SPX indicated to open with a small loss. The open was fairly calm, there was a bit of volatility with the indices moving up briefly to set new intraday highs (DJIA and COMP) before profit taking set in. The first half of the trading day saw the indices drift lower until hitting bottom just after 11AM. The second half of the day saw the indices drift sideways with a narrow range.

Economic Calendar

The Economy

There was a lot of economic data, all of it good. Starting off with initial jobless claims, first time claims rose by 5,000 to hit 239,000 from last week's not revised figure. The 4 week moving average of claims also moved higher, gaining 500 to hit 245,250. On a not adjusted basis claims fell -5.3% versus an expected -7.2% and are down -7.15% year over year. Claims continue to trend near the long term lows and are consistent with labor market and economic health.

Continuing claims fell -3,000 to hit 2.076 million, last week's figure was revised higher by 1,000. The four week moving average gained 1,000. Continuing claims continues to trend near the 2.0 million mark, near the long term low, and consistent with labor market health.

The total number of claims fell -11,449 to hit 2.526 million. The decline is in-line with seasonal and long term trends, and consistent with ongoing labor market health. Looking at the chart we can expect to see this number continue to fall off into the next few months, bottoming sometime in mid-May. Downside target for this figure is 1.65 million.

Along with the weekly jobless claims figures we also received the latest reads on housing starts, building permits and the Philadelphia Federal Reserves Manufacturing Business Outlook Survey. ON the housing front, starts fell -2.6% on a month to month basis, roughly in line with expectations, but are up 10.5% from this same time last year. The previous month was revised higher. Permits rose by 4.6%, above expectations, and are up 8.2% over this same time last year. Last month figure was also revised higher.

The Manufacturing Business Outlook Survey was the star of the day. The Philly Fed survey jumped nearly 20 points to hit 43.3 and has been positive for 7 straight months. This is the highest reading since 1984. Within the report there were strong gains in new orders and shipments, unfilled orders and deliveries were both positive. Employment was also positive and has been so for 3 months. The forward outlook fell a few points but remains strong at 53.5 and is just off a long term high.

The Dollar Index

The Dollar Index fell in today's session despite the strong data and rate hike support from two Fed officials. The index fell nearly -0.7% to hit support at the $100.50 level. Both Lacker and Dudley came out in support of rate hikes saying to the effect that the Fed was on track for raising rates and that the pace of hikes may be faster than currently indicated. Today's move looks more like profit taking to me than anything else, rate hike outlook is still positive so there is little reason to think the dollar will fall, so long as the ECB and BOJ don't start tightening. The indicators are both bullish if showing weakness in the near term. A break below support would be bearish, a bounce would be bullish with upside target near $101.50 and then $102.50.

The Gold Index

Gold prices gained nearly 0.75% on today's dollar weakness. The rise puts spot price just over $1,240 but still below long term resistance. This move may have legs, should the dollar continue to fall, but the fundamental outlook is still dollar positive in my view, and gold negative. The risk now is that US data will cool and the FOMC will back off of raising rates, or that the other central banks will start tightening. Until then upside is limited and may be capped at $1,250 if not lower.

The gold miners got a lift on rising gold prices, climbing more than 1%. Despite the rise the miners ETF GDX did not move above resistance and still looks like a fall is on the way. Divergences persist in the indicators that suggest weakness and those divergences have been confirmed by bearish crossovers in both MACD and stochastic. This of course does not guarantee a fall but qualifies as a text book example of such a signal. Downside targets are the short term moving average, near $23.50, and then $21.50 where stronger support may be found.

The Oil Index

Oil prices got a little today from OPEC. The cartel announced that it might extend the production cut deal, further diminishing demand. The bad thing, for them, is that we'll keep on pumping to fill the demand which will keep prices range bound for now. WTI closed with a gain of $0.25 at $53.36. I expect tomorrow's inventory and Friday's rig count data to support this idea.

The Oil Index fell in tandem with the broad market despite the rise in oil prices. The index fell nearly a full percent, created a medium sized black bodied candle and looks like it will retest support at the 1,250 level. If the market is bullish on this sector as I think it is, this is a good time for it to prove it. A test of, and bounce from, support would help confirm the uptrend. The indicators are consistent with a trend following bounce but have yet to confirm with strong signals. A bounce from support would help that along as well. Support is at 1,200, resistance is the short term moving average near 1,235.

In The News, Story Stocks and Earnings

Dean Foods reported earnings before the bell, delivering 177% profit growth, but failed to impress investors nonetheless. The companies forward guidance is weaker than expected, about half, and sent shares tumbling in the pre-market session. Shares gapped down more than -3% and then doubled that loss during the open session.

Avis was a major cause of today's selling. The rental car company reported a miss on profit due to rising expenses and discount pricing. Along with the miss came guidance that was not so much weak as non-specific. The range is pretty large, $3.05 to $3.75 with consensus smack in the middle at $3.45. Shares of the stock did not respond well and fell -12% from yesterday's close.

Fear tried to creep into the market but it just couldn't do it today. The VIX rose, but only 2% at the close and price action is not bullish. Today's candle is a small black bodied candle with long upper shadow, indicative of resistance to higher prices. The candle formed at and confirmed resistance at 12.50 with a pin-bar and possible shooting star. The indicators remain weak and consistent with an asset trending near its lows; momentum is barely poking above flat line and the bullish signal fired by stochastic is already fading. There may be another test of resistance tomorrow, it is OPEX, so there may be a little more volatility. In any event, the VIX is very very low and consistent with a rising market.

The Indices

The indices tread water today, just below the current all time highs, and one of them at least set a new all time high. The Dow Jones Industrial Average led the market, closing with a gain of 0.04%. Even so, today's candle is a small black bodied candle, forming when the index made a small gap up at the open, and has visible lower shadow. This candle is not unexpected given the rally we've seen this week and is welcome. The trend remains up and the indicators are on the rise so I am expecting higher prices. MACD momentum is still pretty low and has plenty of room to move up before reaching extreme levels, stochastic is showing strength with a cross of the upper signal line. Upside target is 21,000 in the near term.

The NASDAQ Composite posted the smallest loss, a mere -0.08%. The index created a small spinning top doji, setting a new all time intraday high, and appears to be hitting a peak. MACD has begun to crest, consistent with a peak, but the current wave is stronger than the last so it looks like momentum may be building again. Support on a pullback is 5,750, upside target is 6,000.

The S&P 500 made the 2nd largest decline today, -0.09%, barely edging out the tech heavy NASDAQ. The broad market created a small hanging man/spinning top doji, just under yesterday's all time high. The indicators are both bullish although MACD reflects today's consolidation move. Stochastic is more bullish, showing strength with a crossing of the upper signal line. Near term resistance is 2,350, a break above there is bullish with upside target near 2,400 in the near term.

The Dow Jones Transportation Average was today's laggard, giving up -0.83%. The index created a small bodied black candle but gapped lower and created a long enough lower shadow to engulf yesterday's. The indicators are consistent with a peak so today's action may be a precursor to deeper pullback although the long lower shadow suggests that buyers are waiting to step in on any dips. Support is near the short term moving average, near 9,250, should the index continue to pullback. A break to new highs would be bullish and trend following with upside target near 10,000.

The rally took a breather today and that is probably a good thing. A little profit taking, a little new money, a little rotation is just the thing to keep a bull market rally nice and healthy. Consolidation may continue tomorrow, there may even be a dip, but I expect to see higher prices in the near and short term driven on economic data, earnings expectations and Donald Trump, and there isn't a lot of data due out over the next week. I am bullish, cautiously buying on the dips.

Until then, remember the trend!

Thomas Hughes