12 Minute Read

Market Recap April 25, 2016

April 25, 2016

By | 6 Comments

MARKET SNAPSHOT
Dow17977.11-26.64(-0.15%)
Nasdaq4895.79-10.44(-0.21%)
SP 5002087.79-3.79(-0.18%)
10-yr Note-5/321.906
NYSEAdv 996Dec 2019Vol 861.0 mln
NasdaqAdv 1044Dec 1783Vol 1.446 bln

 

IN THE NEWS HIGHLIGHTS:

  • Caution ahead of Fed and BoJ meetings
  • Oil slides
  • Heavyweight financials and industrials underperform
  • Earnings season wears on

 

RECAP– The market initially gapped up from the weekend open (be mindful that the /ES futures begin trading from Sunday evening) despite there being relatively little news to spur to do so. From there it sold off through the night and including opening hour of trading before finding significant support at 2070 (and between 2078-2080 on the SPX).

In-depth look of daily news at Briefing.com (CLICK HERE)

In-depth look at after hours movers (CLICK HERE)


Economic Calendar

Today

  • Nothing major today.
  • New Home Sales: Actual – 511K   Forecast – 521K   Previous – 519K
    New Home Sales came in slightly weaker than expected, but nothing to worry about. New home sales came above the 500K mark in 3 out of the last 4 months (and 8 of the last 14) showing solid growth and solidifying of the real estate market for the first time since the sub-prime meltdown, but still nowhere close to the rapid growth seen from 2000 to August 2008.


Upcoming Reports

  • April 26: Core Durable Goods
  • April 26: CB Consumer Confidence
  • April 27: Crude Oil Inventories (watch out for this as last week’s report sparked a bull run)
  • April 27: FOMC Statement (“The Granddaddy of them All.” This is going to be the major market mover of the week. Look out for a possibly hawkish statement as many traders and economists expect a rate rise in June and are looking at the language of this report to give them a hint.)
  • April 27: Federal Funds Rate (A rate rise this month is highly unlikely. Traders will be looking at the language in the statement as a hint for the June 15 meeting.) 
  • April 27: Monetary Policy Statement from the Bank of Japan (Might as well put this in bold as well since the Japanese central bankers do tend to surprise, and shock, the world with their monetary policy. The most aggressive of Central Banks, they have in the past announced massive levels of Quantitative Easing without notice and most recently have been the first central bank to announce negative rates. With the BoJ, you could always expect the unexpected.)

 

FedWatch Rate Hike on Probability for April 25: 0.0% (View the probability chart here)


A Look At The S&P 500 Futures Chart – KEY Levels

  • Short term Support above 2070.
  • Resistance at current levels up to 2105.
  • VIX closed above 14 today.
  • Average daily volume (increase volume is usually a sign of strong support).
  • The futures over the past few days have created something of a bearish channel with support created at the 2070-2072 area and was briefly tested intra-day. Expect this level of support to hold up until Wednesday when we get the FOMC Statement.

(Right click to enlarge pic in new tab)

ES Futures Chart 4.25.16


A Look Into the Heat Map

 

Heat Map 4.25.16

A deeper look into the market will show that the selloff today was precipitated mainly by the energy sector and drug manufacturers. We also saw weakness from Financials for much of the day, which may resume. Financials have been bearish for much of the year and recently rallied coming off of a stronger than expected earnings season. A deeper look into the chart for the financial sector (XLF) shows that it is coming into a strong resistance point at 23.5 and due for a retracement. With an already poor showing from the Tech sector last week, combine that with a retracement in Financials and Oil and you will have a perfect storm of catalysts for a selloff in the end of the weak. Both can be precipitated by the FOMC Statement later in the weak.

MARKETS

(click on symbol for chart)
SPX –  Bull
DOW Bull
Nasdaq Bull
Russell  Bull

VIX – 14.12 – Bear

 

COMMODITIES

Oil (USO) –  Bull (coming into a retracement at 42-42.5)
Ag (DBA) – Bear
GLD –  Bear
SLV –  Bull

THE DOLLAR

UUP USD weighted ETF – Bear 

 


SOLON’S TRADING THOUGHTS

Be careful with your trading this week. The market can flip on a dime with the FOMC Statement scheduled to come out on Wednesday. We are coming into a make or break point with the market. A hawkish statement from the FED will strengthen the US Dollar (which should inversely weaken oil and gold since both are priced in USD). The threat of a tightening monetary policy will also send fear through the market as well. Make sure you are hedged and your portfolio is protected.


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6 Replies to “Market Recap April 25, 2016”

  1. Avatar Terry says:

    Thanks Solon…

    Much Appreciated

  2. Bill Trimborn Bill Trimborn says:

    Thanks for the write-up, Solon!

  3. Avatar ERICSIMMS says:

    Wonderful recap, Solon. This will be an interesting week, indeed. Reduce your risk, balance your portfolio, good advice in times like this.

  4. Nicholas Kingsbury Nicholas Kingsbury says:

    Yea not really doing much till after Wednesday. Never want to be on the wrong side of the fed.

  5. SolonStephanou SolonStephanou says:

    Yeah, the FED is usually dovish, but it’s that one line, or word, that could spook the market. They’re also still anticipating 2 rate hikes this year. Logically it would follow that they would be spaced out with one toward the end of the year with the other being in the middle. The FED is hawkish about employment and inflation, with wage growth being the only data point that they’re missing. If you’ve been following the CME Rate Hike Tool, the probability of a hike in June has been increasing with it now being 22.5%. The FED, unlike the BOJ, doesn’t try to hide what it’s going to do, but rather spell it out for us to read between the lines. Hence, the April Statement and the May minutes will be important to look at for any indication.

  6. Thomas Hammonds Thomas Hammonds says:

    Good Stuff Solon!

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