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Market at a Glance - 2/22/2018
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By:
Christopher Mistal
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February 22, 2018
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2/21/2018: Dow 24797.78 | S&P 2701.33 | NASDAQ 7218.23 | Russell 2K 1531.84 | NYSE 12695.53 | Value Line Arith 6040.95
Psychological: Stunned. Bullish sentiment was running at multi-decade highs in late January according to Investor’s Intelligence Advisors Sentiment survey. This is no longer the case. Bulls have retreated to less than 50% and correction advisors have increased to nearly 37%. Bears are still scarce at just under 15%. In late January, the “wall of worry” that the market climbs was essentially nonexistent. This appears to no longer be applicable. The easing of extremely bullish sentiment does give the market some room to recover.
Fundamental: Firm. Unemployment is low, corporate earnings are growing and GDP is currently forecast to be running right around 3%. These are all fair data points, but clear signs of economic overheating are still absent. The recent uptick in some inflation metrics and bond yields was once considered a positive. It was confirmation that the economy was on firm(er) footing, not a warning that a recession was imminent.
Technical: Mixed. Markets went from overbought to oversold in seemingly record time. Bullishly support was found above DJIA, S&P 500, NASDAQ and Russell 2000 200-day moving averages. The current rebound is struggling with resistance around the 50-day moving averages. Stochastic and relative strength indicators have all improved and there is still some room left. NASDAQ’s chart looks the best having cleared its 50-day moving average. Similar moves by DJIA, S&P 500 and NASDAQ would be welcome confirmation that the bull market is still alive and well.
Monetary: 1.25-1.50%. It would seem the greatest fear is the possibility that the Fed may be chasing after inflation and may need to raise rates quicker than previously expected. Inflation was well below the Fed’s stated 2% target for a rather lengthy amount of time and could easily overshoot on the high side. Should inflation overshoot, the Fed may still take its time raising rates considering all the effort (trillions of $ in QE) that went into stimulating it.
Seasonal: Bullish. Normally a solid performing month, March typically enjoys even better results in midterm years. The month’s overall ranking improves due to increase in average gains. DJIA and S&P 500 rank #4 while NASDAQ, Russell 1000 and Russell 2000 rank third best overall.