Weekly Market Update – 17 April 2017 BMO

Screen Shot 2017-04-17 at 12.45.30 PM

Last week’s headlines kept on giving as investors displayed caution in light of the ongoing situations in Syria and North Korea. The S&P 500 ended the week with a loss of 1.1%, but, more notably, the benchmark index finished the week below its 50-day moving average (2352).

North Korea took center stage at the beginning of the week after the U.S. Navy ordered the Carl Vinson Strike group towards the Korean Peninsula. This prompted rumors of Chinese troop movement along the North Korean border, but these claims were later refuted by China’s Defense Ministry.

President Trump added some fuel to the fire on Tuesday morning, tweeting that he would like China’s help in diffusing the North Korean situation, but the U.S. is willing to solve the problem on its own. However, through all the noise, the S&P 500 was flat through the first two days of the week as its 50-day moving average provided a measure of support.

North Korea celebrated the birth anniversary of founder Kim Il-sung on April 15 and there was speculation that another nuclear test failed that day.

The conflict in Syria took precedence on Wednesday as U.S. Secretary of State Rex Tillerson made a stop in Moscow. Mr. Tillerson met with Russian President Vladimir Putin, despite earlier reports that the U.S. diplomat would not have access to the Russian president, but conversations were reportedly heated. Nonetheless, the two countries agreed to establish a working group to iron out their issues.

Investors shifted their focus back to the home front on Thursday with JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) kicking off the earnings season. All three companies reported better than expected earnings, but were mixed when it came to revenues; JPM and C beat top line estimates while WFC fell short. However, the banks were unable to capitalize on the upbeat reports, which acted as a discouraging signal to the broader market.

If one thing can be said for sure after reflecting on this week’s activity, it’s that investors are becoming more skeptical about the future, evidenced by the CBOE Volatility Index (VIX 15.67, -0.10), which increased three points for the week. The VIX index now sits at its highest level since the presidential election.

The lingering geopolitical issues led to a notable dip in rate hike expectations. The fed funds futures market ended the week pointing to a 57.3% implied probability of a June hike, down from last week’s 70.6%.

ECONOMIC DATA

(Excerpts from Briefing.com)

Bonds yields fell with the the belly of the curve taking the biggest drop. The decline in yields was consistent throughout the week as investors ran into safety during a shortened week of geopolitical uncertainty.

Commodities saw Copper close lower while Crude and Precious close higher for the week.

Agriculture Closing Prices all closed higher for the week, snapping a three week losing streak:

~~~~~~~~~~~~~~~~~~~~~~~

wk16THE WEEK AHEAD

The coming week is the first of two of the most bullish consecutive weeks in the market – weeks 16 and 17 – for most equity issues.

Monday 17 to Friday 21 April (Week 16)

The sixteenth week of 2017 (wk16) is bullish for the DIA with more than 70% over all the averages and very bullish for the SPY with 80% over all the averages.

The 2017 Stock Trader’s Almanac’s averages for the week are all bullish:

Alma

Key Economic Dates

Mon 17 Apr

Tue 18 Apr

Wed 19 Apr

Thu 20 Apr

Fri 21 Apr

Sat 22 Apr

Sun 23 Apr

Key Earnings Announcements

~~~~~~~~~~~~~~~~~~~~~~~

SUMMARY

As we dive into the heart of earnings season on the back of more geopolitical uncertainty against the backdrop of two of the most bullish weeks in the trading calendar, I almost want to be 100% bullish as the broader market reels in doubt/fear. Such trepidation usually becomes unfounded as the facts unfold and any little good news will rally the markets in a huge way.

The only concern for me is earnings as no less than a third of the DOW components put their numbers on the line this week. I am not expecting downside surprises but I will be watch the language for any hint of hawkishness moving forward.

Screen Shot 2017-04-17 at 2.27.57 PM

Dow Jones

This respite in the market since March has seen the benchmark indices correct by more than 3% and could serve as the perfect springboard for the next leg up or at least return to its historical high.

Share

If you enjoyed this post, please consider to visit Pattern Trader Tools, leave a comment or subscribe to the feed and get future articles delivered to your feed reader.

Comments

No comments yet.

Sorry, the comment form is closed at this time.