16 Minute Read

Market Recap May 2, 2016

May 2, 2016

By | 4 Comments

MR
MARKET SNAPSHOT
Dow17891.16+117.52(0.66%)
Nasdaq4817.59+42.23(0.88%)
SP 5002081.43+16.13(0.78%)
10-yr Note-9/321.866
NYSEAdv 1906Dec 1106Vol 960.6 mln
NasdaqAdv 1809Dec 1218Vol 1.717 bln

 

 

IN THE NEWS HIGHLIGHTS:

  • Market rebounds following the selloff from last week.
  • Crude Oil drops.
  • Dollar weakness continues.
  • Gold makes new highs.
  • AAPL continues to lag behind while AMZN leads the market.
  • April ISM Index disappoints.
  • Puerto Rico misses debt payment which furthers the sovereign debt crisis.

 

RECAP– From the open on Sunday, the market rallied with strength coming off of Friday’s intraday lows. Market bought overnight, sold off following the open, but rallied with strength throughout the day and into the close. This, despite losses in oil which should have tempered the rally. Today has been one of the few days this year where the market gained while there has been a major loss recorded in the price of crude oil.

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

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


Economic Calendar

Today

  • ISM Manufacturing PMI – Actual:  +50.8%   Forecast: +51.6%   Previous: +51.8%
    • It’s a leading indicator of economic health – businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy. Above 50.0 indicates industry expansion, below indicates contraction. Today’s figure was below expectations and worse following last week’s lackluster GDP growth figure.  


Upcoming Reports

  • May 4: ADP Non-Farm Employment Change
  • May 4: ISM Non-Manufacturing PMI
  • May 4: Crude Oil Inventories
  • May 5: Unemployment Claims
  • May 6: Average Hourly Earnings m/m
  • May 6: Non-Farm Employment Change
  • May 6: Unemployment Rate

The first week of the month is usually a busy week as fresh economic reports come out with important statistics. It will be even more important considering how severely the dollar sold off in the past week (and ever since December) and how we haven’t seen a rate hike so far this year, following an anticipated 4 hikes from when we ended last year.

 

FedWatch June 15 Rate Hike on Probability for May 2: 13.1% (View the probability chart here)


A Look At The S&P Index Chart – KEY Levels

  • Bounced off support at 2050.
  • Friday’s candlestick shows a long wick (it actually formed a “W” bottoming pattern on the intraday chart).
  • Not very pleased with the display of this chart, but you will notice a substantial spike in volume on Friday for both the /ES futures and SPY if you enter these in Think or Swim. A spike in volume at a low usually indicates support holding.
  • Substantial drop in the VIX today. Which briefly crossed over the Bollinger Band.
  • 2080 on the SPX has always been a weak level of resistance.

 


A Look Into the Heat Map

 

AAPL continued to lag today while AMZN continues its post-earnings run. We are seeing a mixed bag with Tech companies and Basic Materials, the latter of which is very surprising considering today’s drop in crude oil.

MARKETS

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

VIX – 14.63 –

 COMMODITIES

Oil (USO) –  Bull – Crude Oil retraced today despite weakness in the dollar. 
Ag (DBA) – Bear

DBA

I am entering this chart as my way of showing appreciation to Cynthia Blackwell, who on Thursday’s Market Recap asked why I had DBA as bearish. My response was as follows:

“I would still categorize this as Bearish. It’s easily Bearish on a 3-Year/Weekly chart as it is still lingering at it recent lows which it only put in 2 months ago. If I drop down to a 1 year/Daily Candlestick chart, I’m more likely to say it has been trending sideways (with a prior bearish skew) and putting multiple bottoming patterns. It had a bearish channel from August to February which has broken and put in a higher/low. It looks to have a smaller Head & Shoulders pattern from January to March which makes the head of a longer term H&S pattern. I wouldn’t call it a reversal just yet until it clears 21.5 and maintains it. For the record, and it’s kind of cliche, but a trend remains the trend until it is no longer the trend. In simple terms, bearish remains bearish until it is clearly (and you could say with confidence) that it is bullish. You are right in pointing this out as it obviously has many indications of a reversal.”

Thank you again Cynthia, and as a reminder to all, I do appreciate the participation and comments and please don’t hesitate to leave them.

GLD –  Bull – Briefly put in a new high today but gave up all of its gains. Gold’s rally in the past 3 days has less to do with gold itself, but rather in large part to the dollar’s weakness.
SLV –  Bull

THE DOLLAR

UUP USD weighted ETF – Bear – As mentioned earlier, this will be a huge week for the dollar. So many economic reports are coming out, and just in time as the dollar needs good news in order to put in a reversal. The dollar not only broke its long term support of 94, but ran past 93 and but in a low of 92.5. I can see this running as far down as 92 before news breaks out later this week to determine a new direction (or a further run down). Not only will this week’s economic news determine the direction of the dollar, but also that of FED policy as the market is pricing in less than a 20% chance of a rate hike in June.

 


SOLON’S TRADING THOUGHTS

This is going to be a big week, especially for Forex traders as there are so many news events to trade around. Economic data will likely be driving the market this week as most of the large cap S&P companies have already announced their earnings. It is hard to explain how the market has maintain such a high level despite a lackluster earnings season, although I am sure that a rebound in oil and weakness in the dollar went a long way.

Also, be mindful of the short term trend. The trend is vastly different on a 30minute/hourly chart than it is on a daily chart. The daily chart as indicated earlier looks like it is coming off of support on Friday, but when you switch the chart to a lower time frame (30/60 minute), we see a short term bear retracement and came in perfectly into resistance at today’s close. It will be interesting to see if this is leads to a longer term bearish run, and also why you maintain protection/insurance on your portfolio and why you should switch into different time frames.


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4 Replies to “Market Recap May 2, 2016”

  1. Mario Gutierrez Mario Gutierrez says:

    Great recap Solon!! I am curious about your thoughts on the RUT. It seems like a great short term bullish retracement to me. Looks like a bearish retracement on the weekly chart, but it has been a very strong bullish run since mid feb.

  2. SolonStephanou SolonStephanou says:

    Good question. You could always change the bias of your trend based on your time frame. If you’re only looking at Feb until now, then yes, it is bullish. But when a stock or index loses 20% from its highs in a given time frame, and note that I am looking at the 1 year/daily chart, it is officially in a bear market or bearish. The RUT lost more than 20%, and some want to see at least a Fibonacci retracement of least 61.8% or 78.6% before they call for the reversal of trend. The RUT comes just shy of the first figure and came back down to 50%. Donna Miller teaches that a 50% retracement is just a deeper retracement and not a reversal, and she’s pretty good with technical analysis as futures traders generally are. If this is a higher low, and it proceeds to break through that 61.8% with conviction, then you can go ahead and call it bullish. Although if this breaks down again, and the 1120 mark doesn’t hold, then it will run to the next level of support of 1020 and then 950 after that. Depends on your bias.

  3. Avatar Terry says:

    Thanks Solon

  4. Avatar ERICSIMMS says:

    Great recap, Solon. Things are getting interesting as we try to figure out if this was a pivot top or just a pause in the bull run upward.

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