Stock Market Gets Real | Are we There Yet?

Last Week US Equity markets made their strongest statement of the year in defense of recent lows after a brutal first 6 weeks of 2016.

The frantic 3 day rally that began the prior Friday rallied Major Market Averages close to 6% before taking a breather Thursday and Friday. For the shortened 4 day week, the DJIA gained +2.6% to close at 16,392; the S&P 500 + 2.8% at 1917.78, while the NASDAQ outperformed +4% at 4504.43.

DJIA

DJIA 2-22-16

Oil rallied above $30 and held that level until Friday.  I know it’s only 3½ days, but with oil we’ll take what it gives us, and $30 has been the Mendoza Line for WTI the last couple weeks.  Sorry, but Pitchers and Catchers did show up in Florida and Arizona midweek.  

Oil stocks had one of their better weeks of the year, showing some relief that it’s trying to build a base in the $28 – $32 level for WTI and $32 – $35 for Brent Crude.

crude oil prices

crude oil brent 2-22-16

While some of the strongest buying had all the earmarks of short covering in beaten to near death names from the Mining, Materials and Energy sectors, it continues to feel like there is accumulation from in the multinationals, thought to be in a solid enough state to survive any further shakeout.     

It was also constructive that FOMC officials “tapped down” talk of a Negative Interest Rate Policy; NIRP eventually invading US Markets at the end of the previous week backed up by the good fortune of some encouraging macro data on the inflation front toward the end of last week.

Specifically, on the Macro front:

January Core CPI came in at +0.3 % Friday, which brings the trailing Year-over-Year reading to +2.2%.  This is the largest 12 month increase in Core CPI since June 2012.  Of course the FED has talked incessantly of a 2% inflation target and although they favor the PCE Price Index, they will certainly view the CPI data as a marker of progress toward achieving their 2% target.

The Uptick in CPI came 2 days after Core PPI showed an increase for January of +0.4%, while Industrial Production jumped +0.9%, both ahead of expectations.

The Atlanta FED raised its projection for Q1 GDP to +2.6%.  Keep in mind that GDP has had aberrantly weak Q1 readings each of the last 2 years. and the Atlanta FED had weaker than consensus GDP projections over the last 2 years.

No doubt a Q1 GDP of +2.5% or better would throw a lot of cold water on the  “pending recession” talk that has started to gain some traction during the recent market downturn.

Stock Market Gets Real | Are we There Yet?

So Now Where Are WE? 

This is a Big Week!!   There’s just so many things on the Radar.

            Does the January/February double bottom hold?  

Is the next big test against support or resistance?

Stock Market Gets Real

SPY 2-22-16

We had a 100+ handle round trip in the S&P 500 the first 12 trading days this month, and Now Things Get Real.

February 1 the S&P 500 closed at 1939.38, with an intraday high of 1947.20.   That February 1 close was the highest close since January 7, and appropriately, the 1940 – 1950 level on the S&P 500 will act as the first real resistance level.

February 11 the S&P 500 closed at 1829.08 for the lowest close since April 2014.  The intraday low of 1810 is a double bottom with the intraday low of 1812 from January 20; now being referred to by some as the war of 1812.

There’s the battle ground in the near term.  If someone can give us a sneak look at the next 10% move in oil that lasts for more than a minute or two……Oil has been the Pied Piper of the stock market  the  last 8 months and you have to respect that relationship until proven otherwise.

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