Quiet Week On Wall Street


SPX - Bullish 3 Weeks tight pattern forming 1.13.14STOCK MARKET COMMENTARY:

The S&P 500 ended the week a few points higher as it continues consolidating its very strong year-end rally. The market still looks very strong and a pullback of some sort would be welcomed at some point. Remember the bullish fundamental backdrop is still in place for stocks. There are two possible scenarios: 1. The economy grows organically or 2. The Fed increases QE to help the economy grow. Both scenarios are bullish for stocks in the near term. The biggest concern is what happens when the law of diminishing returns kicks in and all the Fed printing doesn’t help Main St or Wall St? We’ll cross that bridge when we get there. Right now, Main St and Wall St are responding very well to QE. As we have mentioned several times this year, we are in a very strong bull market and pullbacks should be bought, not sold. In the short term, the market is clearly extended and due for a another short term shallow pullback. Meanwhile, the intermediate and long term outlook remain very bullish as the major averages and a slew of leading stocks continue to act very well.


Stocks ended lower on Monday causing the S&P 500 to experience its third consecutive down day. So far, the S&P 500 has yet to have a winning day in 2014. Each year, people love focusing on January for some correlation to how the overall market will perform for the rest of the year. Statistically the correlation is very low at best. Economic data was thin, the ISM non-manufacturing index for December slid to 53.0 from 53.9, missing estimates for 54.6 while durable goods rose by +3.4%.

Stocks rose for the first time in 2014 on Tuesday and snapped a three day losing streak as investors digested the latest round of economic data and waited for earnings season to begin. The November trade deficit narrowed to $34.3 billion from a downwardly revised $39.30 billion (from $40.60 billion). Many analysts were expecting the deficit to come in at $40.40 billion. Economists believe that the lower trade deficit in November and October will help Q4 GDP. Elsewhere, the Senate approved Janet Yellen’s nomination to lead the Federal Reserve with a 56 to 26 vote. Stocks were quiet on Wednesday after the ADP said private sector employment rose to 238k last month, beating estimates for 203k. Later that day, the December FOMC minutes showed that some officials saw “waning benefits” from monthly bond purchases. The minutes also showed that some members wanted to see QE end sooner rather than later.

THURSDAY & FRIDAY’S ACTION: Dec Jobs Report Disappoints

Stocks were quiet on Thursday as everyone waited for Friday’s jobs report. Before Thursday’s open, the Labor Department said weekly jobless claims slid to 330k from an upwardly revised 345k (from 339k). The Street was expecting a reading of 338k. Before Friday’s open, the Labor Department said US employers only added 74k new jobs in December which missed estimates for around 200k. The unemployment rate slid to 6.7% due to a large chunk of workers giving up (participation rate). A separate report showed that the real unemployment rate, without any special adjustments, would be 13.1%.


As we have been saying all year, the market is very strong in all three time-frames: short, intermediate, and long. The last pullback was shallow in size (%decline) and scope (days/weeks, not months). As always, keep your losses small and never argue with the tape.


Here are more articles you may like

Claim Your Free Guide Today

Give us your email and we will give you the tools to change your life. 


Learn about Early Entry Points & much more...

© ChartYourTrade | Contact us: website@chartyourtrade.com

Disclaimer: All communication from ChartYourTrade is general in nature and for educational and general informational purposes only. Under no circumstance should it be considered personalized investment advice. All our work is general in nature and not specific to any one person. All the information on this site and/or that originates from us, or any of our partners or affiliates, is for educational and informational purposes only and is NOT a recommendation to buy or sell anything. To avoid any conflicts of interest, we do not have a working relationship with any of the companies mentioned in our work. Furthermore, we may have a long, short, or no position in any, or all, of the names that appear in our work and they may change at any time without notice. Investing and trading in capital markets or using margin carries a high level of risk and may not be suitable for all investors. Leverage can work against you as well as for you. Before you decide to invest or trade in capital markets you should carefully consider your investment objectives, level of experience, and risk appetite, among other factors. The possibility exists that you could sustain a loss of some, all, or more of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with capital markets, investing/trading, and seek specific investment advice from an independent financial advisor and other professionals. Remember all the information we provide is for educational and general informational purposes only and is subject to change without notice.

Charts and Data are courtesy of MarketSmith Incorporated. Join MarketSmith here.

Terms of Service