Here’s A Positive From Friday’s Data
The major indexes posted modest gains last week,
with the strength in tech shares helping the NASDAQ to break its 6-week losing
streak. Interest rate-sensitive shares, such as Homebuilders and Financials,
also posted a strong week thanks to the continued decline in bond yields. The 2
big events of the week were Intel’s mid-quarter update on Thursday and Friday’s
Employment report. Ahead of the news, traders lacked conviction and were
unwilling to make any large bets. It turned out that both reports didn’t do
much to excite the street, since equities finished flat on Friday, but the
session was a day trader’s dream come true. Intel’s update was considered a
minor disappointment, but not a big surprise, because the company narrowed its
revenue target to the bottom portion of their prior range. Also, the chip
bellwether suggested end-demand in Asia, its primary growth driver, was a bit
softer than in prior quarters. But, since the stock had already pulled back in
excess of 15% from its January high, it’s fair to say the news was already
reflected in the stock’s price.
As for the
Employment Report, the “jobs added†number came in well below expectations
again. To add insult to injury, the 2 prior months’ already low readings were
adjusted downward. Despite the weak figures, many market players were pleased
with the data, since they felt it would keep the Fed on hold through year’s
end. The net-net result was a mixed close for equities and a sharp rally in
bonds. While weak economic data may be
a short-term positive for equities, especially with so many hedge funds being
model-driven, it also suggests that the economic recovery is not as strong as
the pundits would like everyone to believe.
The March SP 500 futures closed
Friday’s session with a gain of +3.50 points, and closed at a 2-year high with a
gain of +13.75 points. Volume in the ES was estimated at 1,078,000 contracts,
which was well ahead of Thursday’s pace, and almost twice the daily average. On
a weekly basis, nothing has really changed. The contract posted a market
structure low and continues to ride its uptrend. Looking at the daily chart,
the ES posted a bullish engulfing line and expanded its range off of Thursday’s
“NR7” day to spike above February’s high, but settled back below trend line
resistance. Friday’s action with the heavy volume was the type typically seen
in a “blow-off top”. On an intraday basis, the ES spiked through the 60-min and
30-min trend line resistance we’ve been following, but settled back below it to
start Monday’s session with triangle patterns.
                   
The Banking Index (BKX) broke
to another new all-time high with divergence, so we may see a pause here. The
Dollar Index (DXC) rally was stopped dead in its tracks on Friday’s data, but so
far, we just have a normal pullback to broken resistance, now acting as support.
                
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Looking ahead this week, the
economic calendar is fairly quiet until Thursday’s February Retail Sales data.Â
The Producer Price Index mess continues as February’s number has been postponed
now along with January. Thursday is also futures rollover day as June becomes
the active contract month (symbol is M).
Program Trading Levels
Fair Value – (0.26)
Buy Program Premium – 0.63
Sell Program Discount – (1.14)
Closing Premium – 1.14
Closing Bias: If the futures gap down at
the open, watch for a retracement up towards the gap fill.
Please feel free to email me with any questions
you might have, and have a great trading day tomorrow!
Chris Curran