Weekly Market Update – 23 January 2017 BMO

Dexes

The DOW refused to break above 20,000 again as it completed the flattest month in 50 years. The Dow’s high and low prices over the past month was a thin 1.4 percent, the narrowest gap in data going back to 1957. It also seems to be completing a rather flat Double Top as of Friday’s close. All the benchmarks closed lower for the week with the Russells falling into negative for the year.

Expectations for a stronger economy have not only been bolstered by policy hopes from the new administration, but also by the slew of better-than-expected economic data. Weekly jobless claims remain around their lowest levels in decades, while the consumer price index rose 2.1 percent in December on a year-over-year basis. In fact, the Citi U.S. Economic Surprise index has risen to its highest level since 2014. A higher reading on the index indicates more positive economic data surprises.

Sector standings were consistent throughout the day, with telecom services (+0.9%) and materials (+0.9%) camping out at the top of the leaderboard, and health care (-0.3%) and industrials (unch) setting up shop at the bottom. Each of the remaining seven sectors closed in the green. Energy (+0.5%) broke its two-session losing streak, piggybacking on crude oil’s 2.1% advance. The commodity finished at $53.25/bbl, climbing for the second consecutive day as investors eyed this weekend’s OPEC/non-OPEC compliance meeting, hoping for indications of a tightening market. The financial sector (+0.5%) had a poor showing this week, despite ending Friday with an uptick. The space lost 1.6% for the week as better-than-expected quarterly earnings results from some of its top components were met with a sell-the-news response in the wake of the sector’s huge 20.5% fourth quarter gain.

The top-weighted technology sector (+0.5%) also finished the day higher. Technology started the day on a positive note after both IBM (IBM 170.55, +3.74) and Skyworks Solutions (SWKS 88.67, +10.21) reported better-than-expected earnings, adding 2.2% and 13.0%, respectively. Skyworks Solutions’ spike also had a ripple effect on other chipmakers, evidenced by the 1.3% increase in the PHLX Semiconductor Index.

In addition to IBM, three more Dow components reported before today’s opening bell, including American Express (AXP 76.20, -0.49), General Electric (GE 30.53, -0.68), and Procter & Gamble (PG 87.45, +2.75). American Express and General Electric declined 0.6% and 2.1%, respectively after reporting disappointing results while Procter & Gamble jumped 3.3% on better than expected earnings-per-share and upbeat organic sales growth.

Looking ahead, investors will not receive any economic data on Monday, but they will see a slew of earnings reports. Most notably, McDonald’s (MCD 122.26, +0.08) and Halliburton (HAL 56.45, +1.11) will report before the open, while Yahoo! (YHOO 42.05, -0.04) will report after the close.

(Excerpts from Briefing.com)

Bonds

YieldsThe bond yield curve steepened from the 13 Jan close with the longer maturity yields rising as the 2yr yield fell.

At the start of the week on Tuesday, yields across the board actually fell to flatten the curve from the previous Friday’s close. However, yields rose during the shortened week to steepen the curve.

(From 13 Jan 17 to 20 Jan 17)

Commodities had a mixed week with Precious and Energy prices finishing higher for the week.

Agriculture Closing Prices mostly rose from the week before, making it two straight weeks of gains.

THE WEEK AHEAD

Tuesday 23 to Friday 27 January (Week 04)

The fourth week of January (wk4) is flat for the SPY and DIA over the last 5, 10 and 15 years with the benchmarks with  less than a 60%.

The 2017 Stock Trader’s Almanac’s averages for the DOW and S&P500 are bearish on Monday and Tuesday at around 66% on the DOW and 53% on S&P500. Wednesday, Thursday and Friday get bearish with the DOW at an average 59% and the S&P500 at an average 57%.

Key Economic Dates

Mon 23 Jan
• EU, French, German Flash Manufacturing PMI, Flash Services PMI, German Iso Business Climate

Tue 24 Jan
• US Existing Home Sales
• Australia CPI q/q, Trimmed Mean CPI q/q

Thu 26 Jan
• EU German Prelim CPI m/m, Spanish Unemployment Rate
• UK Prelim GDP q/q
• US New Home Sales
• Japan Household Spending y/y, Tokyo Core CPI y/y

Fri 27 Jan
• EU Spanish Flash GDP q/q, M3 Money Supply y/y
• US Durable Goods Orders m/m, Advance GDP Price Index q/q, Consumer Sentiment

Earnings out next week for Q4 earnings

Earnings Season really hots up now with the industrial big-hitters releasing their results this week. No less than a third of the DOW components will be announcing their Q4 results in the week along with the big metal/steel makers and towards the second half of the week, the tech companies.

Monday (January 23)

Tuesday (January 24)

Wednesday (January 25)

Thursday (January 26)

Friday (January 27)

SUMMARY

Screen Shot 2017-01-23 at 5.46.55 PM

Overlooking Friday’s volumes as it was Expiration Friday, the volumes during the last three weeks’ consolidation somehow don’t favour the bulls. The MACD is also hinting at more downside as the bearish momentum gains traction the closer it gets to its convergence. The Double Top on all the benchmarks also hint at bearish tendencies.

I will be holding out on buying and will remain on my long Puts for now. But I will be watching for any sign of reversals towards the end of this week just in case.

Happy Hunting!!

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