Today's action was centered firmly on the FOMC. The broad market indices held within very tight trading ranges near Wednesday's high right up until the policy statement was announced. After the statement was announced, the market did the same thing. The statement was a dud; there was little change to last month's message, further rate hikes are still on the way.
Asian indices were flattish and mixed in Thursday's trading. The boost from mid-term election relief was short-lived. Chinese stocks fared worst with the Shang Hai falling -0.22% and the Hong Kong Heng Seng rising about -.35% on weaker than expected trade data. The Chinese trade surplus was a bit less than expected but that is due to large increases in both imports and exports, and the rise in imports offsetting the strength in exports. Bottom line; the exchange of goods between the US and China is ramping up before new tariffs can take effect.
European markets were mixed ahead of the FOMC decision. The DAX and CAC were both down, the DAX leading with a loss near -0.50%, while the FTSE posted a small gain. Activity here was affected by the EU Economic Bulletin which now says the EU economy will stall in coming years. The news is only the latest in a string of economic data that shows EU economic growth is suffering.
Futures trading indicated a flat to mildly negative open for the indices all morning. The SPX opened with a loss near -0.2% and held within 0.2% of that level for most of the day. The market action was calm, quiet, and a bit indecisive. The indices are indicated higher, but resistance is close by, with earnings season winding down and the Trump/Xi trade talks coming up the market may have a hard time moving higher in the near-term.
The Initial Jobless Claims was reported as 214,000 this week. This is unchanged from last week's report but down 1,000 from this week's revised figures. The four-week moving average of initial claims fell -250 to 213,750. On a not-adjusted basis claims are up 7.8% this week versus an expected increase of 8.4%. Compared to last year not-adjusted claims are down -11.6% and consistent with long-term labor market tightening.
The Continuing Claims figure fell -8,000 from a not-revised figure to hit 1.623 million. This a new low. The four-week moving average fell to 1.640 million. This is also a new low. Both the continuing claims and moving average of continuing claims show tightening within the labor market consistent with robust economic activity as we head into the holiday shopping season.
The total number of jobless claims rose by 11,611 to 1.408 million. This increase is as expected and in line with seasonal trends. The total claims are down by 114.1% over the same time last year and consistent with accelerated growth over the same time last year. These figures are consistent with tight labor markets and long-term labor market tightening.
The Dollar Index
The FOMC statement was a dud in that it failed to spark a major move in the equities, but it did spur the Dollar Index to move higher. The FOMC statement gave a positive view of the US Economy with no mention of stock market volatility or geopolitics holding it back. The committee says the labor markets are strong (duh), economic activity is expanding (really?), and spending is strong. Regarding their inflation outlook, there is little change.
The DXY, under the combined effects of the weak EU outlook and strong FOMC outlook, was able to bounce from the short-term moving average and advance more than 0.50%. The index created a medium-sized green candle moving in line with the prevailing trend and looks like it will go higher. The indicators are not yet in support of the move, so it is possible resistance will cap gains, possibly near $97, but economic data could change that outlook.
The Gold Index
Gold prices edged lower after the FOMC statement but only a quarter percent and within the intraday range. The candle is small and red and sitting on support at the short-term moving average where support may be strong. The indicators are bearish and suggest downward pressure but only within a trading range which means support targets at $1,220 and $1,210 are likely to hold if tested. With the dollar moving higher it is likely gold will fall, the problem is geopolitical angst which seems to be supporting gold prices. If gold moves higher resistance is likely at $1,240.
The Gold Miner's ETF GDX opened lower but moved higher intraday. The ETF is supported by gold prices but looks like it may be slipping from support levels near $19.50 and the short-term moving average. The indicators are mixed, but MACD is bearish and stochastic near the lower end of its range, so the downward pressure is dominant at this time. If the ETF does move lower support is likely to be found near $18.50 and then $18.00 if the first target is broken. If the ETF moves higher resistance is possible at $19.50 and $19.75.
The Oil Index
Oil prices moved higher in early trading on record crude imports to China. Later in the day new estimates that show US production topping 12 million barrels per day by mid-2019 had them moving lower. The news increases the threat of oversupply, and that has prices moving lower. WTI shed another -1.60% in today's session and looks like it could go lower although momentum continues to diverge from the lows. Oil markets may continue to slide towards $60 in the near-term, but it looks like they are overextending. Any piece of bullish sounding news could have prices rebounding to retest $66.50 as resistance.
The Oil Index fell under the pressure of declining oil prices. The index is confirming resistance at the bottom of October's price-gap and likely heading lower. The indicators have not confirmed the move, so a fall below support is not yet indicated although a test of support is. My targets are 1,350 and 1,300 in the near-term.
In The News, Story Stocks and Earnings
Wynn resorts shook things up with their warning about Macau. The gaming giant says it has seen a slow-down in revenues centered on its premium games that may lead to weaker than expected revenue. The comments included spots of weakness at other properties including Las Vegas. Shares of the stock fell more than -12% on the news leading a rout among other gaming and hospitality stocks.
AstraZeneca reported before the bell and delivered a mixed bag of results. The company says revenue fell -14% from last year, below analysts expectations, but profits were better than expected. The EPS was substantial, about 45% better than expected, and came with an affirmation from the CEO the company was on track to meet his $40 billion annual sales goal by 2023. The target represents a 13.3% CAGR that is dependent on strong sales in China. The market wants to believe the company can do it and sent the stock up more than 5% in today's trading.
Disney reported after the bell and beat expectations on the top and bottom lines. The iconic brand reports record revenue boosted by a 50% YOY increase in studio-based income. Disney also announced the expected launch of Disney+, a streaming service aimed at battling Netflix. Shares of the stock were up about 2.0% in after-hours trading.
Most of the major indices fell in today's trading, but the moves were more of a wobble than a real decline in value. The NASDAQ Composite led the decline with a loss near -0.75%. The tech-heavy index created a small red candle that reveals resistance at the long-term moving average and support at the short-term moving average. Because the trend is bullish and the indicators are consistent with a trend-following movement I see a test of the long-term EMA in the works. If the index can close above it a move higher is likely to follow. My target is 7,800 if the index can close above 7,600 and hold the level.
The Dow Jones Transportation Average came in a close second with a loss near -0.85% as it encounters resistance at the long-term moving average. The index is supported by bullish indicators and the short-term moving average, so a firm test of the 10,750 level is expected. A move above 10,750 would be bullish and could lead to a retest of the 11,000 level.
The S&P500 closed with a loss near -0.25% and created a small spinning top doji. The doji, along with Wednesday's long green candle, also forms a bullish Harami pattern that can lead to trend continuations. The indicators are bullish and suggest a move higher is in the works, my target is 2,875 in the near to short-term if the index can close above Wednesday's high.
The Dow Jones Industrial Average posted a small gain in today's session, 0.04%. The blue-chip index formed a small green candle near the top of Wednesday's candle and set a new high while doing it. The indicators are bullish so a bigger move may be coming, the risk is that today's action also shows resistance at a key long-term uptrend line. A move above this level, near 26,200, would be bullish and likely lead to a retest of 26,400 and 26,800.
The market wobbled a bit in today's session, but the move looks like consolidation within a rally and not a preparation for a market reversal. There is still a lot of risk in the market, but it is in decline so optimism may begin to reenter the picture and help lift the markets. Because the outlook for holiday sales are strong, labor markets continue to tighten, and the outlook for earnings growth is positive I remain firmly bullish for the long-term. In the near-term, I am a bit more cautious, bullish, but cautious.
Until then, remember the trend!