1/30/2016: Dow 19971.13 | S&P 2280.90 | NASDAQ 5613.71 | Russell 2K 1352.33 | NYSE 11205.24 | Value Line Arith 5327.42
Psychological: Jitters. Weekly CBOE Put/Call ratio has been hanging out between 0.60 and 0.70 since the second half of December. This would suggest sentiment is not too hot or too cold.
Investors Intelligence Advisors Sentiment survey paints another picture with most recent readings (last week’s report) of 58.2% bulls, 17.5% bears and 24.3% correction. Perhaps everyone is waiting to see what the new administration will do next. Thus far, actions taken already by the new administration have stirred many emotions, but appear to have had minimal to no impact on actual economic activity; at least for now.
Fundamental: Mixed. After a soybean driven 3.5% growth spurt in Q3 of 2016, GDP slipped back to a meager 1.9% in the Q4. For all of 2016, GDP was just 1.6%, down from 2.6% in 2015. Based upon these numbers, growth is headed in the wrong direction. However, employment and consumer spending appear to be remaining reasonably firm. The unemployment rate was 4.7% in December and spending increased 0.5% in December. Corporate earnings have also been mixed. Big banks broadly beat, but energy companies continue to struggle.
Technical: Consolidating. After breaking out to new all-time highs, DJIA, S&P 500 and NASDAQ appear to be pausing to digest and reflect on recent gains again. Stochastic, relative strength and MACD indicators are all drifting lower. Last’s week’s breakout appears to have failed. DJIA and S&P 500 have spent nearly 3 months (well) above their respective 50-day moving averages. NASDAQ has spent about two months. If weakness persists, respective 50-moving averages will likely be in play and are key support levels. These levels are: DJIA 19670, S&P 500 2250 and NASDAQ 5463.
Monetary: 0.50-0.75%. A FOMC meeting is taking place now and ends on February 1. Based upon the CME Group’s FedWatch Tool, odds are essentially zero for an interest rate change this meeting. Then they will not meet again until mid-March. Within historical context, interest rates are still highly accommodative and are not likely to be a drag on the economy or the market.
Seasonal: Tepid. Even though our January indicators went 3-for-3, giving 2017 the January Trifecta, February is still the weak link in the “Best Months.” Frequently poorly performing February is even worse in post-election years, ranking #11 DJIA and #12 for S&P 500, NASDAQ, Russell 1000 and 2000 with average losses across the board ranging from –1.4% to –3.9%.