|NYSE||Adv 1704||Dec 1289||Vol 961.5 mln|
|Nasdaq||Adv 1558||Dec 1259||Vol 1.622 bln|
IN THE NEWS HIGHLIGHTS:
- Oil gains after EIA report
- Continued momentum
- Focus remains on Q1 earnings results
- Heavily-weighted Technology, Financials, and Health Care outperform
RECAP- Market gave up its gains during the closing hour. The market sold off through much of the night and trended sideways (with slight bearishness) after the opening bell. It wasn’t until the Crude Oil inventory supplies were released in the EIA report at 10:30 AM that oil rallied despite a 2.1M barrel increase in supply. The sharp spike in oil prices fueled gains in the market which caused the /ES futures to temporarily break resistance at 2100 before giving up virtually all of its gains in the last hour of trading. In short, a critical resistance was tested and the market failed to break through.
In-depth look of daily news at Briefing.com (CLICK HERE)
In-depth look at after hours movers (CLICK HERE)
- Existing Home Sales: Actual – 5.33M Forecast – 5.29M Previous – 5.07M
Existing Home Sales came in stronger than expected after a surprise decline last month. Average home prices are up 5.7% and marks the 49th consecutive month of year-over-year gains.
- EIA Petroleum Status Report (Crude Oil Inventories): Actual – 2.1M Forecast – 2.2M Previous – 6.6M
Oil inventories increased for a second consecutive week. Despite increased supply, the market initially bought on the release of the news and continued to buy throughout the day.
- April 21: Philly Fed Manufacturing Index
- April 21: Unemployment Claims
FedWatch Rate Hike on Probability for April 20: 2.3% (View the probability chart here)
Notice S&P 500 below pic
Support above 20 day EMA & 2040
Resistance at current levels up to 2105
RSI- Above 50. Close to overbought levels at 68.2.
OBV- Above Moving Avg.
Note that with today’s action, the market has run up over 300 points since its February 11 low without crossing under the 20 day EMA. Possibly over extended.
VIX was briefly below 13 today.
(Right click to enlarge pic in new tab)
VIX – 13.28 – Bear
SECTORS – Trend on daily chart (click symbol for chart)
Materials (XLB) – Bull
Energy (XLE) – Bull
Financials (XLF) – Bull
Industrials (XLI) – Bull
Technology (XLK) – Bull
Staples (XLP) – Bull, but pulling back to neutral looking for support
Utilities (XLU) –Neutral
Healthcare (XLV) – Bull
Discretionary (XLY) – Bull
Mining (XME) – Bull
Real Estate (IYR) – Bull
Retail (RTH) – Bull (but notice weak OBV)
Transports (IYT) – Bull
Pharmaceuticals (PPH) – Bull
UUP – USD weighted ETF – Bear
SOLON’S TRADING THOUGHTS
I’ve said since the second week of the year that the market is heavily correlated to oil (nearly tick by tick). This is another day that proves the strength of the correlation. Make sure to switch your charts to an intraday time frame (either 5 or 15 minutes) so you can see it as well. As oil goes, so does this market.
Looking at a chart of the /CL futures, you could identify that oil has put a bottoming (W) pattern earlier in the year. It then ran up for into resistance at $42.5, retraced into a new support (higher low) at $35, and came back to the previous resistance. Today’s report was all it needed to break resistance and run. Expect the first level of new resistance to hold at $44/45 and the next level at $50. We are also coming into a time of year where oil is seasonally strong and supply begins to drop. At this point, there is no reason for oil not to continue to run.
In the mean time, I am very skeptical with the S&P. At first glance, it looks to be over extended. Since its low on February 11, the market has rallied over 300 points without much of a retracement. The RSI is closing into an over bought area while the chart is violating the Bollinger Band on a daily chart. Not to mention that we have come into a critical resistance level at 2100. With the VIX being so low (and briefly under 13 today), today was a great day to buy puts to protect your portfolio as it doesn’t get much cheaper than this.
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VIX much lower shows complacency and bullishness in the markets. Therefore credit spreads have been hard to find. But consider calendars for positive theta trading.
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