Market Update - January 27, 2017
It is earnings season time and earnings are coming in hot and heavy. John Butters, Senior Earnings Analyst at Factset, a company that compiles earnings data, revealed last week that during the 4th quarter earnings calls, the top three issues CEO’s and CFO’s cited for 2017 were, tax policy, regulation and potential changes to trade policy. (FactSet January 20th, 2017)
Next Friday will be the release of the January job’s data the first for the current administration. Let’s see what our indicators look like.
10 Week Bullish Percent (Short-term): In the month of January, the 10 week has traveled from very overbought at 80% to 66%, (slightly overbought) back to 75%, very overbought again. The strong equity market is keeping this indicator overbought, which could last another 1-3 weeks. A 2-4% pullback in equity indices would not be a surprise.
Optionable Stock Bullish Percent (Intermediate term): this indicator is on OFFENSE and in January hit 64%, which is higher than the 62% hit last August.
NYSE Bullish Percent (NYSEBP) (Longer-term): this indicator is on OFFENSE and has hit 68% in January, also besting the 66% from last August. (Source: Dorsey Wright)
Point and Figure Charts (Source: Dorsey Wright)
S&P 500: The S&P 500 put in a classic consolidating pattern through the month of January. That pattern provided the springboard this week for a move to a new high of 2,295. Now the S&P 500 has a big zone of support from 2,250-2,280. (Source: Dorsey Wright Website)
Crude Oil: after hitting a new high for 2017 at $55, crude oil has fallen back to the $51 level, which is acting as good support. Next important support is from an uptrend line at $48. (Source: Dorsey Wright Website)
Continuous Crude Oil
US 10-Treasury Note: after pulling back as low as 2.3%, the 10-year is making its way back to the 2.5-2.6% level. The rally in the equity markets and the pro-growth talk is getting bondholders nervous and rates are floating back up. It is beginning to look like a zone of consolidation is forming. (Source: Dorsey Wright Website)
Relative Strength: No changes over the last several weeks. Domestic Equities #1, International Equities#2, Commodities #3, Fixed Income #4, Cash #5, and Currencies at #6. Note that the difference between International Equities and Commodities is very, very small. (Source: Dorsey Wright Website)
The rally that started after the election found some traction this week with many of the major indices posting new highs and trumpeted by the press. Although the “tone” of the markets have improved, we are still cautious. Our indicators have reversed up from midfield, which is not a great vantage point to aggressively add to equity portfolios. Remember, we are only one month into 2017, and there is a lot of time left this year to potentially generate investment returns.
Have a great weekend!
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