Market at a Glance 4/30/2015

By: Christopher Mistal

April 30, 2015

Psychological: Bullish. Normally sentiment indicators would be the focus, but over the past four years or so they have become less reliable, tracking the trend rather than signaling changes. So following last week’s new all-time highs, bullish sentiment is running on the excessive side again. Like most other indicators, patterns or streaks, the market will find a way to end the current streak of sentiment indicators being largely a trend following metric and return to their intended contrary purpose. Most likely in a grand and painful manner as the market has a tendency to do just the opposite of the crowd when the crowd least expects it.

Fundamental: Softening. Perhaps the long, harsh winter is to blame. Nonetheless, 2015 Q1 GDP was a big miss at 0.2% and March’s employment report showing only 126,000 net new jobs was a disappointment as well. New home sales remain dismal, but existing home sales have been solid due to thin inventories. Corporate earnings are also tepid with U.S. dollar strength impacting many large multi-nationals. Falling energy prices are a plus for consumers, but not for the people that work for in the energy sector or the company’s profits.

Technical: Range bound. Just when it looked like NASDAQ was ready to lead the market higher, it ran out of steam. NASDAQ did finally close at a new all-time high twice, for the first time in over 15 years. The market’s longer-term trend higher is still intact, but it has yet to decisively breakout of the increasingly smaller range it has been stuck in since last December.

Monetary: 0-0.25%. The Fed’s announcement yesterday was a non-event. Tepid economic data had already drawn the consensus to the view that a rate hike would be later, rather than sooner. The Fed merely confirmed this by acknowledging recent data and doing little else. With a 2% inflation target (real or expectations), as one of the pre-req’s to raising rates, it could be a substantially longer wait than many expect. At last check, it has been decades since Japan last had “normal” interest rates. A similar U.S. outcome is not really that far-fetched.

Seasonal: Bearish. May officially marks the beginning of the “Worst Six Months” for the DJIA and S&P. To wit: “Sell in May and go away.” May has been down in three of the last five years (sizeable losses in 2010 & 2012). In pre-election years, May ranks 10th for DJIA and S&P 500 with average gains of just 0.03% and 0.2% respectively. Small caps and tech fair better mostly due to their “Best Months” typically last through June.