Weekly Results :
S&P 500 869.60 +1.52%
DJIA 8,131.33 +.59%
NASDAQ 1,673.07 +1.24%
Russell 2000 479.37 +2.39%
MSCI Emerging Markets 27.98 +1.63%
A game of expectations:
Another positive week for global markets as fear slowly evaporates. This rally is mostly driven by earnings and ongoing six week momentum. Recent optimism is fueled by participants expecting results better than analyst estimates. At the same time, those chasing returns are gaining further conviction. Financials reported a pleasing quarterly outcome. In addition, improving technicals and less market turbulence justify the recent upside move. Nonetheless, this inevitable recovery is due for a pause.
Buying Dynamics:
In terms of leading groups, Homebuilders are nearing their 200 day average faster than other groups. Increase in home sales and appreciation in Housing Market Index (HMI) hint of an early turnaround. At the same time, Real Estate state stocks are cheap attracting long term investors Yet it seems too premature to declare that the downtrend is nearing an end. Therefore, expectations continue to drive price moment than actual fundamentals for weeks ahead.
“Analysts have cut estimates for 772 companies in the S&P 1500 and raised estimates for 290 over the last four weeks. This works out to a net of -482, which represents 32.1% of the Index - the highest level since late September. " (Bespoke –April 2009)
Macro Clues:
The US dollar peaked on March 4th. Two days later, the S&P 500 bottomed at 666. Now, investors are wondering if the US Dollar declines along with interest rates and commodities. Perhaps, this trend creates a favorable environment for equities. Basically, this showcases an expansion in risk appetite.That said, credit conditions for most companies are deteriorating. At early glance, investors dismissed cooling economic data from China. One interpretation suggests that most buying is due to speculation. Similarly, mixed economic data can . In other words, recent trends are not fully defined from a long-term perspective.
“The smart money has not moved back into the market since the financial collapse of 2008. This suggests that the smart money is viewing the current rally that began on March 9 as a bear market rally." (Chartoftheday.com)
Macro Levels:
S&P 500 [869.60] Approaching a key level around 900 after surpassing 50 day average of 791.
Crude [$50.33] Several months of a sideway pattern where the 200 day average stands at $72.
Gold [$870] Two month decline trigged after Gold reached annual highs in March. Longer term uptrend remains intact with major support at 840.
DXY – US Dollar [85.98] Index continues to maintain its relative strength despite recent pullbacks.
US 10 Year Yield [2.94%] Yields are struggling to move above 3%. In upcoming days, observers closely watch to see potential trend reversal.
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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.
