Stock Market Consolidating Double Digit Gains

Equity markets practically gave investors an extended weekend on Monday.

Trading volume and volatility were significantly lower than last week with market averages split between fractional gains and losses on the day.  Maybe investors we’re still adjusting from the hour stolen from them over the weekend courtesy of Daylight Savings Time, or just needed a breather before the trifecta of Central Bank policy statement on tap this week from the BOJ, FOMC and BOE starting Monday night in Japan.  

Stock Market Consolidating Double Digit Gains from the Last Four Weeks

Thanks to a sharp rally Friday, when Market  averages gained +1.5% to +2%,  Equity markets staged their 4th consecutive weekly advance, as Major Market averages have now gained +10% to +14% since their lows 1 month ago on February 11.  If Investors can consolidate those gains this week, they will be in position to set their sights on positive returns for Q1 2016 for at least the DJIA and S&P 500 whose YTD deficits have now been reduced to -1.2% and -1% respectively.

That’s certainly not a done deal yet, but with 12 trading days left in Q1, the market has a much healthier feel to it that it had for most of the first quarter.

Oil also had another strong week with gains of 5%+ as Brent Crude held the $40 level at week’s end and WTI settled close to $38.50. Rising Oil and commodity prices have certainly provided plenty of fuel for the rally the last month, although stocks were struggling with stiff resistance levels on numerous indices until the move higher on Friday.  Monday saw Oil backtrack 3% to 4% and we’ll have to see if the $40 level on Brent Crude plays out to be near term resistance the remainder of the week.

The credit for Friday’s rally has to go to Super Mario and the ECB, who went “All In” at their policy meeting Thursday morning.  The  myriad of enhanced stimulus measures, sent the EURO on a wild ride; initially down to 1.08 US$, then back to reaction highs of 1.12 US$.  The unintended consequences of the currency volatility had   markets second guessing themselves most of Thursday, before the surge higher on Friday.

It was almost as if investors needed a few extra hours to adjust their vision to the 3D version of QE served up by the ECB before they could clearly see what was being presented.

The Week Ahead will be heavily focused on action and guidance from Central Bankers from Tokyo to Washington and back to London.  Domestically we’ll get reports on Retail Sales, PPI, and NY State Manufacturing this morning at 8:30 am.  

Wednesday we’ll get CPI, and Housing data in the morning followed by the FOMC policy statement at 2:00 pm.  Thursday we’ll get the Philly FED report a t 8:30 am followed by Leading Economic Indicators at 10:00 am.

The Early Line: Stocks are looking at a lower opening with S&P futures lower by 10 handles, following declines pushing 1% in the Eurozone at midday.

Investors are back on their heels a bit to start the day as Oil is lower by 2% following losses between 3% and 4% yesterday. Also the QE babies are a bit colicky this morning after the BOJ basically took a pass on further QE following their plunge into the abyss of Negative Interest Rates at their January meeting.

Watch Friday’s breakout levels of S&P 500 2000 and DJIA 17,000 is the early selling picks up steam.

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