Weekly Results:

S&P 500 866.23 -.39% 
DJIA 8,076.29 -.68% 
NASDAQ 1,694.29 +1.27% 
Russell 2000 478.74 -.13% 
MSCI Emerging Markets 27.83 -.54%

Overall Picture:

Investors strive to decipher polices and regulatory decisions. Even Friday’s document on the health of US financial system is not enough to explain long term solutions. Through this maze, earnings point to an upside quarterly surprise. So far, 67% of companies have reported numbers above analyst expectations. (Bespoke Investment). Maybe, this makes sense following a historic downturn and ongoing economic concerns that led to lower expectations. Challenges in the current landscape go beyond declaring a directional wager. Specifically, long-term investors look to grasp mixed economic data, gauge sentiment among partakers and speculate on pending catalysts. Interestingly, Federal Reserve guidance is a topic of key consequence for equity and currency observes. Clearly, an increasing demand for further clues given side way price patterns of S&P 500 index and Crude. Simply, majority players are reluctant to add at current levels despite recent shift towards risky assets. A pause in this rally now sets the stage that tests buyer conviction.

Picking Spots:

Upcoming earnings ought to shape stock-specific reactions. Perhaps a time to  Identify themes for the next cycle based on lessons from previous turnarounds. For example, isolating between innovative and resource groups might present opportunities. That said, headlines are difficult to ignore even for those contrarians. As a new administration marks the completion of 100 days; the blurry economic climate takes center stage. Yet, when spotting leading groups  housing and interest sensitive themes are prime candidates. A step back, reminds us that Financials offer the highest risk/reward in the marketplace. This week, S&P/CaseShiller Home Price Index along with FOMC comments serves as key catalyst for speculators. 

“And in the housing sector, the declines in sales and construction of single-family homes have abated in the past couple of contrarians months--in part, perhaps, because of the low levels of mortgage interest rates and the greater affordability of housing. As demand firms, and once inventories of houses and a broad range of goods are brought into line with sales, economic activity should begin to stabilize.” (Speech from Federal Reserve Vice Chairman Donald L. Kohn)

Select Technology and Healthcare stocks remain undervalued when examining financial statements.From a cycle view point, a promising outlook for merger activities as Larger companies seek growth. Importantly, nonbelievers of emerging markets and commodities can rotate into Western based innovative companies. In other words, an alternative option. Nonetheless, investors sentiment towards risky assets paints a better overall picture.

MACRO LEVELS:

S&P 500 [866.23] Index keeps hovering in a tight range around 800-900. Since October 2008, directional trend is unclear given a range between the 50 and 200 day moving average. 

Crude [$51.55] Trying to re-accelerate after bottoming earlier this year. Near-term support is around $46.

Gold [$907.50] Developing strength in the last few weeks. Odds appear favorable for a recovery. Next key target is annual highs of $989 reached in February 2009.

DXY – US Dollar [84.71] 2+ month of declining trend which suggests an early decline. Approaching an inflection point as index nears 84. Further economic data can provide clues for an unambiguous reaction.        

                                                                                                                                                                                                                                
US 10 Year Yield [2.99%] Once again, yields are nearing the 3% range. Specifically, 3.04% marked annual highs in February.

 

Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only and are in no way intended to serve as personal investing advice. Readers should not make any investment decision without first conducting their own thorough due diligence. Readers should assume the editor holds a position in any securities discussed, recommended or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in anyway, considered liable for the future investment performance of any securities or strategies discussed.