Market at a Glance 3/31/2015

By: Christopher Mistal

March 31, 2015

Psychological: Bullish. And it just doesn’t matter. The S&P 500 has not had an official 10% correction since October 2011 and any dip since has just been a good buying opportunity. Last week the S&P 500 closed at the low of the day for three days in a row, a first in data going back to at least 1962. Even this seemingly bearish mini-panic ended with a two-day buying spree. Someday there will be an official correction and another bear market, but for now high bullish sentiment only seems to mean the market’s advance is going to slow down for a little while before taking off again.

Fundamental: Mixed. Labor market gains persist supported by better than expected February numbers that indicated 295,000 net new jobs which reduced the unemployment rate to 5.5%. However, it is increasing looking like 2015 Q1 GDP will be soft. Any weakness will likely be dismissed as the result of a harsh winter this year and possible the surging U.S. dollar. Whether or not this pans out will depend of how quickly other economic data, like housing, improves with the arrival of spring.

Technical: Range bound. The market struggled in March. DJIA and S&P 500 appear to have only extended the upper end of their trading ranges that started in December. NASDAQ and Russell 2000 look stronger. Both have remained above their 50-day moving averages and their February breakout levels throughout March. Watch NASDAQ’s and/or Russell 2000’s next move for an indication of where the market is most likely headed next, higher or lower.

Monetary: 0-0.25%. By removing the word patient from its most recent statement, the Fed has finally tacked toward raising interest rates for the first time in nearly eight years. However due to a strong dollar and other central banks ramping up stimulus, any rate increase is likely to have a muted impact on overall rates. The combination of currency strength and relatively higher interest rates is likely to bolster foreign demand for Treasury bonds that will in turn keep most interest rates in check.

Seasonal: Bullish. April is the best DJIA month since 1950, third best for S&P and fourth best for NASDAQ (since 1971). In pre-election years, April is even better. April is also the last month of the “Best Six Months.” Starting on April 1 we will begin watching for the seasonal MACD sell signal in concert with early signs of seasonal weakness and will issue an email alert with trading ideas for weathering the “Worst Six Months,” May to October.