Another week of indecision as markets manage to drift slightly higher. I would like to say there is something to worry about or be excited about, but unfortunately neither side made the effort to make the week memorable. The following are some Notes of Interest from the week of trading:
Crude Oil (OIL) – supply fact versus projection speculation — simply put. The supply data showed the seventh straight week of building excess of supply despite the cuts in rigs and production. Crude was volatile prior to and following the data report. We closed last Friday at $50.61 and this Friday $49.52. It was the in-between movement and chatter that created the volatility. Still not willing to play the craziness of the commodity, but it worth watching how it unfolds near term.
Gasoline (UGA) – gained 7.2% on the week as the strike expands in the refineries. The speculation is for it to last and cut into supplies of refined products as refineries will not run at full capacity. Thus, somewhere in-between is the truth. The move above the $36.70 mark Wednesday was the entry point, but willing to watch as this unfolds near term. Heating oil (UHN) is moving higher on colder weather driving speculation of demand and the strikes could have some effect on supply as well adding a new dimension to the result. Watching the energy commodities for trade opportunities as it unfolds.
NASDAQ approaching the 2000 highs only fifteen years later. This is another index attracting speculation on valuation. The large caps have been the driver on the upside of late with the likes of Google, Apple, Priceline and Netflix driving the upside move. How much higher does it go? That is where the speculation comes into play. No one knows for sure… thus manage your stops and keep the upside trend in sight… if it breaks, head for the exits, otherwise let it run and ignore the he said, she said issues.
VIX index moves towards the 13 mark and shows the lack of concern by investors. Earlier this week I called it comfort versus confidence. Worries have been put on the back burner and the outlook remains wait and see. Thus, the best course of action is to… wait and see. Stops are important to remove the emotion should thing reverse with stocks moving lower and volatility higher.
The S&P 500 index closes the month with a 4% gain… but remember it started the year with a 3% decline. It has moved to a new high, but the last two weeks have been more of a drift than a move. News is the driver and in the absence of big news the index has been willing to drift along with the waves of the market. The bias is on the upside, but the risk is alive and well. The best course of action is to take some time to review how the first two months of the year have progressed and look for defined leadership, the prospects of the leadership continuing, and what opportunities are worth the risk of deploying capital moving forward. One day at a time is how we will approach it…
Sunday I will post the outlook for next week. We get fresh economic data with the manufacturing, services and jobs reports all due. Get plenty of rest… you will need it as it promises to be a busy week with plenty of outside activity that could influence the direction of stocks going forward… both short term and longer term.
Relax and Enjoy!