Weak sanction fail to put any pressure on Russia and the talking is putting the market at ease. End results is a bounce back from the selling last week and a positive boost to stocks. News is driving the market currently and that creates more chop and volatility short term. Fundamentally the markets are not attractive and that leaves trading the volatility or trends as they exist. The other option is to play golf and let this work out versus beating your head against the wall. If you don’t like golf, play tennis, take a cruise (please avoid the germs!), go fishing, take your wife on a romantic getaway, anything other than stress over the short term bantering in the markets.
Moves worthy of NOTES:
S&P 500 index moved back above the 1850 level on the day and held into the close. Technology (XLK) led the charge for the index gaining 1.3% and moving back towards the previous breakout of $36.20. If we repeat the move with some volume it may be worth adding to the S&P 500 index model. Industrials (XLI) were up 1.4% showing a solid bounce off the previous low and $52.30 potential entry point if we continue the move higher. The index is still in a rolling top pattern and we will see how it progresses tomorrow.
Healthcare gained 1%, telecom up 1.2%, financials up 1.2% and consumer services up 0.9% all adding to the move in the broad markets. The removal of fear relative to Russia acted as a catalyst for the markets overall. The challenge comes from the fact this is a news driven event and they tend to be more volatile in nature and less of a trend in the markets overall. The good news is the intermediate term uptrend remain in play.
EAFE index (EFA) pushed higher with Europe (IEV) leading the way. This is all in response to the news and a piggyback ride from the US markets. Both bounced off moving average support lines and all we can say is wait and see how it plays out tomorrow.
Volatility index (VIX) dumps to 15.6 after a climb above 18 on Friday. The move in the index shows the removal of anxiety short term from the markets overall. Does this signal an end to the selling and now all things are good? No… it only addresses the sentiment for today. Watch going forward, if we break below 14.8 the buyers will be back in control from a short term perspective.
Thirty year yields rose to 3.63% and bonds dropped 0.7% on the day. Thus, a bounce off the low in yields or support, and a reversal at resistance for bonds (TLT). I expect both the yield and value of the bond to remain in a trading range until the broader indexes find direction looking forward. The key is patience.
Worth scanning the leading sectors for setups to break higher if the bounce continues. Digging in and finding the leading stocks will offer the bets trade opportunities. Semiconductors, healthcare providers, commodities, transports, and industrials are the leaders off the current lows. Volume was mixed on the move higher as the day progressed.
Remain patient and let the market gain clarity to take us to the next trend… up or down.