Markets Test the Gains From the FOMC Meeting

The broad markets started the day in the red, attempted to rally back, but end essentially even on the day. This is what we discussed yesterday relative to a test of the move. The bigger question moving forward is can we regain any upside momentum based on the Fed’s clarity and the economic data. Speaking of which, jobless claims were again higher than expected at 369,000. That coupled with the existing home sales coming in at the lowest number of the year put the markets in a bad mood from the start. My opinion is that the data was used as an excuse to test the move from Wednesday. Still room to grow as investors continue to step in and add to positions. Or are the sellers using strength to lighten positions? Either way, time will tell.

We did add to some position on the test today and we continue to see some positive signs in the charts. The S&P 500 index tested down to 1801 and closed off 1 point at 1809. Not much of a test, but enough to invite more buyers in. Volume was still above average on the day and telecom was the top performing sector up 1.1% on the day. Energy gained 0.3% and technology was up 0.1%. Others were slightly positive or in the red on the day. Obviously not the kind of day some wanted, but was pretty much in line with my expectations on the day. Watch the 1790 mark as the near term level to test.

The NASDAQ index fell 12 points or 0.3% on the day. After the morning test the chart flat-lined the rest of the day. Held the majority of the gain from Wednesday and not significant changes in outlook going forward.

Interest sensitive assets continue to struggle as Utilities fell 0.7% and the ten year Treasury bond dropped 0.4% as the yield creeps closer to the 3% level each day. IYR, iShares Real Estate ETF bounced nicely Wednesday, but managed to give 1.2% or most of the gains with the selling in the interest sensitive assets. This remains a challenge for the sector and being short bonds still is the only logical move near term.

The bottom effect in gold we have been discussing the last two weeks gave way to more downside falling 2.3% on the day. This puts the metal at key support of $114.40. A break lower and it could tumble a long way without much in terms of support. GLL has been the trade of choice and DUST has offered even better results with the miners continuing to accelerate lower. A move above $52.20 gives another entry signal for the short gold miners ETF.

The dollar (UUP) is attempting to move higher and break the micro term downtrend. The yen declining and euro slipping is offering some upside in the buck. Will it last? The news from the FOMC meeting has been the catalyst… how long that lasts is only a guess, but if the strength in stocks remains the dollar is likely to continue the upside trek.

Steel (SLX), unlike gold, made another advance higher today gaining 1.1% and in position to break from the current trading range. This is worth watching moving forward to confirm the upside move. Copper (JJC) stumbled lower today hampered by the news from the housing data. Base metals have been attempting to bounce off the lows and received some mixed reviews on the day from traders.

Apple continues to stumble on worries about the China Mobil deal not being finalized and the missed earnings from Jabil Circuit a chief supplier. Anytime you are looking for a reason to sell a stock you can find one. Why not just admit that you have made 20% and want to take some profit? Watching to see how this unfolds and I like the the current set up in the stock both technically and fundamentally. Watch for the stock to catch support and then advance back towards the previous highs.

Overall a day pretty much in line with expectations. The economic data was not a good sign, but understandable relative to interest rates rising on mortgages. The impact is a slowing in housing and until buyers mindset adjust to the new rate environment we will see how much of an impact remains. One day at a time as this all plays out.