The rally continued last week managing to close above the benchmark 1950 level. The initial bum came from better than expected consumer sentiment. This was reflected in retail sales. There was weakness in the manufacturing sectors. This gave rise to the debate on whether or not the FOMC will raise again raise rates at the March FOMC meetings. A strong February employment report on Friday would increase the likelihood of a March rate increase.
The 1950 is a very important number to the SPX. Market technicians had been predicting another bullish push upward if the SPX could complete a W bottoming formation by closing above 1950.. On Thursday, the SPX completed the formation by closing above 1950. Market technicians are now calling for a bullish outlook in the short-term. Techinical signals – equity only put/call rations and market breadth, are showing buy signals. The VIX needs to go below the 19 level to complete the bullish signals.
The VIX reflected the move upwards in the S&P 500 by hitting new 2016 lows on Thursday. Backwardation in the futures ended the week before last. The VIX futures curve has returned to “normal.” The VIX curve is made by connecting prices of VIX futures contracts but different expiration dates. It is displayed on a chart where the X axis represents expiration date of a futures contract and the Y axis represents prices. VIX futures curve is made of prices of individual VIX futures contracts. The first point (the left end of each curve) on the chart on this page is the spot VIX Index value; the others are futures prices. The far right of the curve is very flat (i.e. the futures prices for different expiration months show very little difference in price.) History has shown this type of flatness in futures curves indicates uncertainty.
The entire week is a lead-up to the US Employment Situation at the end of the week. Wednesday and Thursday will see the release of multiple reports based on domestic employment. Any of the earlier reports will show garner an immediate response from the trade in the E-mini’s – futures on the S&P 500. Other news which may elicit a market response are reports on manufacturing in China and US Factory Orders.
The earnings season is tapering off. The earnings highlights for widely held and actively traded stocks are: 2D Systems, Atmel, Magellan Health, Crocs, Ross Stores, Dollar Tree, Kate Spade, Autozone, Medtronic, Abercrombie&Fitch, American Eagle, Costco, Thor Industries, Kroger, Broadcom, Ciena, H&R Block, Staple, Piedmont Natural Gas, and Big Lots, Announcements date and time can and do change. It is your responsibility to confirm these times.
Economic: Chicago PMI – 8:30, Pending Home Sales Index – 10:00, Dallas Fed Manufacturing Survey – 10:30.
International Economic: Germany Retail Sales – 2:00AM, Japan Unemployment Rate and Household Spending – 6:30PM.
Other: Fed Vice Chairman Stanley Fischer speaks before the National Association for Business Economics meeting.
Economic: Motor Vehicle Sales, Redbook – 8:55, PMI Manufacturing Index – 9:45, ISM Manufacturing Index – 10:00, Construction Spending, Gallup US ECI – 2:00.
International Economic: Germany Unemployment Rate – 3:55AM, EMU Unemployment Rate – 5:00.
Economic: MBA Mortgage Applications – 7:00, ADP Employment Report – 8:15, Gallup US Job Creation Index – 8:30, EIA Petroleum Status Report – 10:30, Beige Book – 2:00.
International Economic: EMU PPI – 5:00AM.
Other: San Francisco Federal Reserve Bank President John Williams speech on the outlook, in Los Angeles – 10:00.
Economic: Chain Store Sales, Challenger Job-Cut Report – 7:30, Weekly Jobless Claims – 8:30, Productivity and Costs – 8:30, Gallup Good Jobs Rate – 8:30, PMI Services Index – 9:45, Bloomberg Consumer Comfort Index – 9:45, Factory Orders – 10:00, ISM Non-Manufacturing Index – 10:00, EIA Natural Gas Report – 10:30.
International Economic: EMU Retail Sales – 5:00AM.
Economic: Employment Situation – 8:30, International Trade – 8:30, Baker Hughes Rig Count – 1:00.
Economic: Gallup US Consumer Spending Measure, Labor Market Conditions Index – 10:00, TD Ameritrade IMX – 12:30.
International Economic: China Merchandise Trade Balance, Germany Manufacturers’ Orders – 2:00AM.
Other: Federal Reserve Vice Chair Stanley Fischer speech to NABE, in Washington – 2:30PM.