{"id":1758,"date":"2020-02-10T21:11:44","date_gmt":"2020-02-10T21:11:44","guid":{"rendered":"https:\/\/straussresearch.com\/?p=1758"},"modified":"2020-02-10T23:15:30","modified_gmt":"2020-02-10T23:15:30","slug":"market-summary-week-ending-2-7-20","status":"publish","type":"post","link":"https:\/\/straussresearch.com\/index.php\/2020\/02\/10\/market-summary-week-ending-2-7-20\/","title":{"rendered":"Market Summary:   Week ending 2-7-20"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"1758\" class=\"elementor elementor-1758\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-b815deb elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"b815deb\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-0c27d8e\" data-id=\"0c27d8e\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-a77a1a2 elementor-widget elementor-widget-text-editor\" data-id=\"a77a1a2\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><strong><u>Market Summary &#8212; Week ending Friday 2\/7\/20<\/u><\/strong><\/p><p><strong><u>S&amp;P 500\u00a0 \u00a0 3328 \u00a0\u00a0\u00a0+3.2% for the week\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 10-year Treasury yield\u00a0 1.58%<\/u><\/strong><\/p><p><strong style=\"font-size: 16px;\"><u>Global Macro News<\/u><\/strong><\/p><p><strong><u>Political<\/u><\/strong><\/p><p>President Trump\u2019s State of the Union speech was viewed as successful, highlighting the strength of the economy.\u00a0 The Senate impeachment trial came to an end as the President was acquitted.\u00a0 Gallup polls show growing approval ratings for the President, high levels of confidence in the economy, etc. \u00a0 The Democratic party appears to be somewhat disorganized.\u00a0\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-ffcb7db elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"ffcb7db\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-dc9fd27\" data-id=\"dc9fd27\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-0e442c5 elementor-widget elementor-widget-text-editor\" data-id=\"0e442c5\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><strong><u>Geopolitical \/ Trade \/ Global Economy<\/u><\/strong><\/p><p>The coronavirus in China remains a major issue, even though it was overshadowed by U.S. domestic politics for most of the week.\u00a0 Hundreds dead and thousands infected in China, but official reports may vastly understate the death toll. \u00a0Entire Chinese cities locked down.<\/p><p>This could have a major effect on China\u2019s economy \u2013 GDP growth could slow to 1%.\u00a0\u00a0Beijing is implementing stimulus measures to help the economy, and the public health crisis could have political implications for President Xi.<\/p><p>Growth in U.S. exports to China (from the recent trade deal) will be delayed.<\/p><p>On the bright side, researchers may have made a breakthrough in the search for a vaccine.<\/p><p>Many believe the virus will continue spreading for months and will not peak until April or May<\/p><p><strong><u>U.S. Economy \/ Inflation<\/u><\/strong><\/p><p>ADP jobs report 291,000 private sector jobs &#8212; stronger than estimate of 150,000.<\/p><p>Friday 2\/7 &#8212; monthly employment report \u2013 225,000 nonfarm payrolls \u2013 stronger than expected, including 44,000 construction jobs, related to a boom in housing.<\/p><p>Unemployment rate 3.6%, wage growth 3.1%.<\/p><p>Labor force participation rate up to 63.4% in January from 63.2 in December \u2013 many are re-entering the labor force.<\/p><p>Despite this very strong data, inflation is not a concern for now.\u00a0<\/p><p>ISM manufacturing index 50.9 in January, up from 47.2 in December \u2013 shows that U.S. manufacturing is making a comeback.<\/p><p><strong><u>Federal Reserve<\/u><\/strong><\/p><p>Due to the recent decline in 10-year bond yields to the 1.50% range, expectations were growing that the Fed would cut rates again, in order to prevent the yield curve from becoming inverted.<\/p><p>However, all the recent strong economic data makes a Fed easing move less likely any time soon.\u00a0 Fed funds futures are pricing in almost a 90% probability of no change in rates at the Fed\u2019s next meeting on March 18<sup>th.<\/sup><\/p><p>The Fed said on Friday that the coronavirus presents a new risk to the U.S. economy.<\/p><p><strong><u>Earnings<\/u><\/strong><\/p><p>Fourth quarter earnings have been generally better than expected, with 70% of earnings reports above consensus estimates.<\/p><p><strong><u>Summary and Implications &#8212;<\/u><\/strong><\/p><p>Last week&#8217;s political developments were generally bullish for the market, as they suggest a greater likelihood that the President will be re-elected, meaning a continuation of the current economic policies.<\/p><p>Recent data shows that the U.S. economy appears to be accelerating, now that much of the uncertainty regarding trade deals has been resolved.\u00a0<\/p><p>The coronavirus remains a wildcard.<\/p><p><strong><u>\u00a0<\/u><\/strong><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-c47607b elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"c47607b\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-e3abed9\" data-id=\"e3abed9\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-09a0605 elementor-widget elementor-widget-text-editor\" data-id=\"09a0605\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"text-decoration: underline;\"><strong>Other Markets:<\/strong><\/span><\/p><p><strong><u>Bond Market:<\/u><\/strong><u>\u00a0 <\/u><\/p><ul><li>Bonds and stocks have been moving in opposite directions, due to \u201crisk on \/ risk off\u201d behavior.<\/li><\/ul><ul><li>In late January when the coronavirus news was first reported, bond prices rallied and stocks fell. This was a move to a \u201crisk off\u201d environment (bonds up in a flight to safety, stocks down).<\/li><\/ul><ul><li>In early February, stocks rallied and bonds pulled back.<\/li><\/ul><p><strong><u>Foreign Equities<\/u><\/strong><u>:<\/u>\u00a0 Emerging markets (EEM), especially the Chinese market, have plunged in the past few weeks due to the coronavirus.<\/p><p><strong><u>Prices of Oil and other Commodities<\/u>:\u00a0 <\/strong>Oil prices and commodity prices in general have plunged in the last few weeks, due to the virus in China.\u00a0 In early January oil was around $63 a barrel and now it is down to $50.<\/p><p><strong><u>Dollar<\/u>:\u00a0 <\/strong>The dollar has been trending higher this year, as the euro has dropped from about 1.06 to 1.04.<\/p><p><strong><u>Gold<\/u>:\u00a0 <\/strong>Gold remains in an uptrend.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-19c0cc5 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"19c0cc5\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-962d5ab\" data-id=\"962d5ab\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-bfa5d86 elementor-widget elementor-widget-text-editor\" data-id=\"bfa5d86\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><strong><u>U.S. Stock Market:<\/u><\/strong><\/p><p>A review of market indicators shows the following:<\/p><p><strong><u>Price \/ Volume activity\u00a0\u00a0 <\/u><\/strong><u>(over the last few weeks)<\/u><\/p><p>Distribution Days:\u00a0 4 SPX, 4 Nasdaq \u2013 a bit worrisome but not overly bearish<\/p><p><strong><u>Behavior of Leading Stocks <\/u><\/strong><\/p><p>Leading stocks have been generally strong &#8212; bullish<\/p><p><strong><u>Breadth \/ Divergences <\/u><\/strong><\/p><p>Some breadth indicators are showing bearish divergences with the S&amp;P 500,\u00a0such as the percentage of stocks above their 40-day moving average<\/p><p>Small caps have been weaker than large caps \u2013 the Russell 2000 fell below its 50-day moving average in late January, and still has not climbed back to its mid-January highs, as other indices have<\/p><p><strong><u>Overbought \/ Oversold <\/u><\/strong><\/p><p>The market has been rising steadily for 4 months, so it is somewhat overbought and overdue for a correction<\/p><p><strong><u>Support \/ Resistance <\/u><\/strong><\/p><p>The S&amp;P 500 found support at its 50-day moving average on its recent pullback, but if the coronavirus turns into a global health crisis a deeper pullback is possible<\/p><p><strong><u>Highs and Lows \/ Trends<\/u><\/strong><\/p><p><u>Long-term Trend<\/u> \u2013 uptrend remains intact.<\/p><p><u>Short-term Trend<\/u> \u2013 uptrend remains intact &#8212; the small pullback in late January was followed by renewed strength in early February.\u00a0 The S&amp;P has reached its January high and the Nasdaq has made a higher high.<\/p><p><strong><u>Sentiment<\/u><\/strong><\/p><ul><li>Investors Intelligence bullish sentiment has dropped in the last few weeks to 47.6% &#8212; thus sentiment is not at an extremely bullish level which would indicate a top<\/li><\/ul><ul><li>The VIX shot up to 19 when stock plunged in late January, but has pulled back to 15<\/li><\/ul><ul><li>Put \/ Call ratio:\u00a0 \u00a00.90 &#8212; neutral\u00a0 \u00a0 \u00a0 \u00a0 \u00a0(note:\u00a0 above 1.20 is bullish, below 0.60 is bearish)<\/li><\/ul><p><strong><u><br \/>Summary<\/u><\/strong>:\u00a0 Stocks have been rising for four months straight, and therefore are overbought and overdue for a pullback.\u00a0 The coronavirus has become a serious concern, but the jury is still out on how serious it will become, and what impact it will have on the global economy.\u00a0<\/p><p>Despite the virus, the market has been resilient, due to very good political and economic news along with good earnings reports.<\/p><p>Thus our strategy has been to make a minor reduction in equity exposure from 80% to 70% because the market is overbought and there is a growing risk of a correction, but to use any pullback as a buying opportunity.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Market Summary &#8212; Week ending Friday 2\/7\/20 S&amp;P 500\u00a0 \u00a0 3328 \u00a0\u00a0\u00a0+3.2% for the week\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 10-year Treasury yield\u00a0 1.58% Global Macro News Political President Trump\u2019s State of the Union speech was viewed as successful, highlighting the strength of the economy.\u00a0 The Senate impeachment trial came to an end as the President was acquitted.\u00a0 Gallup polls [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center 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