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Market at a Glance - 2/28/2017
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By:
Christopher Mistal
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February 28, 2017
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2/27/2016: Dow 20837.44 | S&P 2369.75 | NASDAQ 5861.90 | Russell 2K 1407.97 | NYSE 11558.35 | Value Line Arith 5502.38
Psychological:
Bullish. According to the most recent
Investors Intelligence Advisors Sentiment survey bulls are at 61.2%, bears at 17.5% and correction at 21.3%. The spread between bulls and bears is elevated and in the uncomfortable zone. It does not mean the rally’s end is imminent it suggests now may not be the best buying opportunity.
Fundamental: Mixed. Solid Q4 corporate earnings, new all-time highs, reasonably healthy labor and housing markets, inflation trending in the desired direction all point to a firm overall economy in the U.S. However, growth, as measured by GDP, seems to be lacking. At 1.9% for Q4 2016 and 1.6% for all of 2016 and only around 2% expected in the current quarter there is room for improvement. At some point the market may no longer be satisfied with expectations for future growth and instead demand more immediate results.
Technical: Overbought. Stochastic, relative strength and MACD indicators applied to DJIA, S&P 500, NASDAQ and Russell 2000 are either signaling overbought or in the case of Russell 2000, nearly overbought conditions. Another period of consolidation, similar to late-December into January, would alleviate the condition and would likely pave the way even higher. Russell 2000 just barely participated in the recent break out to new all-time highs and its next move could signal where DJIA, S&P 500 and NASDAQ’s head.
Monetary: 0.50-0.75%. March does host an FOMC meeting, although expectations of another increase in interest rates still remains low. Even if expectations were to change between now and then, and they did decide to increase, interest rates would still be highly accommodative within historical context and not a significant drag on economic activity. Besides, many large multi-national corporations can borrow outside of the U.S. at even lower rates.
Seasonal: Bullish. Normally a decent performing market month, post-election year payments to the Piper take a toll on March as average gains are trimmed. In post-election years March ranks: 5th worst for DJIA and Russell 1000; NASDAQ is 4th worst while S&P 500 and Russell 2000 are the best at 6th worst.