Stocks rallied early Thursday morning after positive trade comments from Peter Navarro, the Director of Trade in the White House, but as has been the trend this week, the early strength turned into afternoon weakness. The Dow did post a 116-point gain, but it had a near 300-point gain going before lunchtime. The other indices were flat to down as the recent leaders lagged, and the lagging Dow turned out to be the out-performer.
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The slight 2-point decline in the S&P 500 gave that index its first 4-day losing streak since late last year. That's correct - even after that 10% correction in February, the S&P never saw 4 down days in a row.
So, with many market catalysts behind us, and the Fed still a few trading days away, the indices seem to be content to chop around in their wide channels until something comes along to propel them in one direction or the other with some conviction.
What economic data that has been coming in has been on the light side, and that has caused yields to dip a bit this week, but last week's jobs report was strong enough to keep investors from getting too concerned about a slowdown. The Retail numbers are also a little troubling lately.
We are still seeing some drips and drabs of earnings announcements, but 1st quarter earnings season won't start get started for about another 3 or 4 weeks.
Next week (the 19th) starts the more negative seasonal portion of March.
The S&P 500 / C-fund was down for a 4th straight day on Thursday as we saw last Friday's jobs reports gains erased. That wasn't a surprise because it had left an open gap on the chart and that gap is now basically closed, although officially there is a 1-point gap still there. The wide trading channel is still intact but it's debatable whether this is still a bear flag or not.
The small caps / S-fund had been leading on the upside, along with the Nasdaq, but that means the two had the most to give up if there was any profit taking. You can see that resistance held and we have another one of those "is this a bear flag or not?" situations.
The Dow Transportation Index is a clear bear flag as its rally off the lows has been more lackluster than the other charts. It also struggled at the 50-day SMA and right now it is testing the 50-day EMA.
The EAFE Index / I-fund was down slightly and the dollar rallied so it had some trouble. You can see the bear flag and the 50-day EMA so there's certainly a technical disadvantage here.
We're keeping an eye on the price of oil as a potential gauge of economic strength and it too has some problems with it trading below the 50-day EMA and, as we mentioned the other day, already trading below the longer-term support line (not shown here.)
The AGG (bonds / F-fund) held firm and did not back away from the top of its bear flag, but it is still in that flag so it's tough to get bullish on bonds yet. As a matter of fact, if I had held bonds I would be using this strength to sell, unless or until that flag is broken on the upside and gets back above the 50-day EMA.
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