More Ups and Downs For Investors

The ups and downs continued in the broad indexes. Stocks started the day lower with the S&P 500 index testing the 1192 support and then the buyers stepped in the balance of the day to lift the index to 2021 at the close. Wednesday the index reversed more than 2% on the intraday swing from high to low. Today the index reversed 1.8% low to high… or the opposite direction and leaves me scratching my head about what buyers liked today that the sellers didn’t like yesterday? The Federal Reserve didn’t issue a retraction on their comments relative to raising interest rates later this year. Nor did the earning picture get any better or the economic data improve. Why the reversal of sentiment? Flip-a-coin and we will pick any of several rationals for the reversal on the trading day. The five minute chart of the S&P 500 index for today is below, and it is easy to see the test of support and the resulting rally off the low. The move keeps the index well within the range and it needs to move back above the 2021 close on Friday to keep the upside alive.

Chart

Back to the cause of the rally in stocks? Some reports say crude oil bouncing off the lows following some consolidation intraday and then pushing back into positive territory gave investors hope and buyers reason to put money to work. Maybe it is true, but the bigger question: is it sustainable? This is another source of pain for investors as the drop relative to supply data on Wednesday created a recent new low for the commodity. Thus, a rally back of 0.6% must have been the rationale for stocks rallying more than 1% on the broad indexes. XLE or the energy sector did turn off the lows corresponding to the rally in the index and gained 2.3% off the lows. The chart below shows the bottoming on the five minute chart for crude, followed by a beak higher. Is this the reason… time will tell. If oil can sustain a upside move going forward in the $50-55 range I would say yes on the sustainable move higher for stocks. But, supply build ups and price wars globally are not likely to shift directions anytime soon.

OIL

 

The after-hours party got started with the news from Amazon topping targets. Sales up 15% and profits better than expected. Shares were up 7% after the release and that should help the sector on Friday. Retail continues to impress overall and the XRT, SPDR Retail ETF has held up better than others in the recent decline. XLY, SPDR Consumer Discretionary equally has done well despite all the doom-and-gloom about the consumer. Worth putting on the watch list going forward for any opportunities to trade or own the sector.

Google also announced after-hours, however, they missed the bottom line, i.e. PROFITS. Why the miss your ask… the stronger dollar created a challenge in the fourth quarter. This again validates the miss handling of hedging against the rising dollar by large corporations. The disappointment from the stock comes in the revenue side from my view. The concern has been about the declining ad revenue in their core search advertising business. YouTube and Google Play have not been able to make up for the declines currently and that remains an issue looking forward for the stock. Shares were down 2.8% after-hours and one to watch as well heading into the trading tomorrow.

It is a busy time for investors with the plethora of data being released. The ups and downs are likely to continue along with the extended trading range for the major indexes. The goal is patience and focus to take advantage of the opportunities that will arise from speculation that disrupts the rational flow of markets during environments like the current one.