A third week of confusing observations, in a row.
Again, it was a great week for the S&P 500, the NASDAQ Composite, and even the DJIA tagged along for a change. Yet, all of this happened with the backdrop of confusing currency action, bond rates and gold moving in the same direction, and of course, escalation of geopolitical rhetoric: worldwide!
Between Crimea, Arab Gulf states, China-Japan, Venezuela, and North Africa, it is not clear what is caused by flight to safety and what is caused by improving economic fortunes.
On the improved economic fortunes, the awaited labor numbers came. The weekly unemployment was better than expected, the ADP numbers lower, but the actual February jobs report was actually good -for both the month and the revision of the prior month.
Retail, as usual, is the beneficiary of jobs data, and hence, other than the Gap Stores (GPS) which suffered some beating late in the week, retailers in my trading-set fared very well for the week.
The bond action, showing hints of resuming the upward march in rates, hurt the mREITs; represented by Annaly (NLY) in my set. The gold (GLD) action though is still casting doubt on my thesis of a continually improving economy. We shall become much smarter this week, as the diplomacy in Ukraine – or lack of – can spook the markets or soothe them. Gold would be the barometer for this coming week.
The agro-industrial issues in my set fared very well and so did the cargo-related issues, while the energy and utility issues were generally on the negative side.
To conclude, this week action did nothing to suggest an economic reversal. Now that the jobs numbers are out and they dispelled the confusion created by weather and the January numbers, my notes from the last couple of weeks relating to economic caution are no longer warranted. Yet, this new geopolitical overhang is something worth seriously watching for.
My regular table for the indices follows.
|Index/ETF Symbol and Name||Daily 3-EMA-7||Weekly 3-EMA-7||Perceived Trend|
|SPX||S&P 500 Index||Positive||Positive||Positive|
|DJIA||Dow Jones Industrial Average||Positive||Positive||Positive|
|COMP||NASDAQ Composite Index||Positive||Positive||Positive|
|GLD||SPDR Gold Trust ETF||Positive||Positive||Positive|
|VIX||CBOE Volatility Index||Negative||Positive||Neutral|
|FVX||CBOE 5 Year Treasury Note Yield Index||Neutral||Positive||Positive|
|TNX||CBOE 10 Year Treasury Note Yield Index||Neutral||Neutral||Positive|
|TYX||CBOE 30 Year Treasury Bond Yield Index||Neutral||Neutral||Positive|
As usual, the reminder is that the movement of the treasury yields is negatively correlated with the price of the underlying instrument.
As for my trading set, my short term “Perceived Trend Oscillator” stood at a “bought” value of 40% on Friday. This is almost identical the value of 38% on the Friday before. The longer term indicators moved also to a “bought” posture, and hence, other than the geopolitical risk, the markets seem to be resuming their upward trend with vigor.
Note that I am down to one issue, Geron (GERN), in my current holdings as per the table below. This has less to do with the caution I was preaching the last couple of weeks than with the fact that I am in the process of testing a new trading strategy. Hence, “cash,” other than my conviction holdings in GERN, is the way to be till I have finalized my new approach. The strategy, as with every strategy I had for almost a decade, also requires the trading set to be created and tracked. So I will continue to provide the weekly updates.
The full trading set table is as follows.
|Symbol and Company Name||Daily 3-EMA-7||Weekly 3-EMA-7||Perceived Trend||Is a Current Holding?|
|JPM||JPMorgan Chase & Co.||Positive||Positive||Positive|
|GS||The Goldman Sachs Group, Inc.||Positive||Neutral||Positive|
|WFC||Wells Fargo & Co.||Positive||Positive||Positive|
|NLY||Annaly Capital Management, Inc.||Positive||Neutral||Neutral|
|MO||Altria Group, Inc.||Positive||Neutral||Positive|
|VZ||Verizon Communications Inc.||Neutral||Negative||Negative|
|GPS||The Gap, Inc.||Positive||Positive||Neutral|
|ANF||Abercrombie and Fitch Co.||Positive||Neutral||Positive|
|DIS||The Walt Disney Company||Positive||Positive||Positive|
|MDLZ||Mondelez International, Inc.||Positive||Positive||Positive|
|BA||The Boeing Company||Negative||Neutral||Negative|
|LMT||Lockheed Martin Corporation||Positive||Positive||Positive|
|DE||Deere & Company||Positive||Positive||Positive|
|EMR||Emerson Electric Co.||Neutral||Neutral||Positive|
|DOW||Dow Chemical Co.||Positive||Positive||Positive|
|ADM||Archer, Daniels, Midland, Co.||Positive||Positive||Positive|
|POT||Potash Corp. of Saskatchewan Inc.||Positive||Neutral||Positive|
|BMY||Bristol-Myers Squibb Company||Positive||Positive||Positive|
|CSCO||Cisco Systems, Inc.||Negative||Negative||Negative|
|NGG||National Grid plc||Positive||Positive||Neutral|
|WMB||Williams Companies, Inc.||Positive||Positive||Positive|
|WM||Waste Management, Inc.||Negative||Negative||Negative|
|NSC||Norfolk Southern Corp.||Positive||Positive||Positive|
Disclosure: It is important that you understand and agree that all information provided in this newsletter rely on publicly available data and tools with no guarantees of quality or suitability for any purpose, and that I can be long or short in any of my trading-set equities, at any time, with or without regard to indicated trends and described analytics, and that I do not give buy or sell or any other financial recommendations, and that any and all actions based on this commentary are solely the responsibility of the reader.