The Week in Review (3/20/16)
US Index performance (5d): SPX +1.4%, DJIA +2.2%, RTY +1.3%, NDX +1.1%, TLT +1.3%
Equities climbed for a 5th week in a row and the SPX is now positive for the year +1.3%. Last week, central banks were in the spotlight with the BOJ and the US Fed holding their meetings. While the BOJ kept their stimulus plan in effect it was the US Fed with the biggest surprise that kept the upward momentum. Fed Chair Janet Yellen not only did not raise interest rates but also scaled back expectations for further 2016 rates increases from four to two. This caused the US dollar to sell off which in turn contributed to further gains in commodities and dollar sensitive sectors like Industrials. For the week, Crude oil gained another +2.4% and is now up a startling +50.5% from the February 11th low. Other commodities that also gained last week were Coffee +6.8%, Sugar +4.8%, Nat Gas +3.9%, and Timber +3.7%.
The Week Ahead
Next week in US Economics we have more Home Data, Durable Goods, and 4th quarter GDP estimates (see table below for details). On Monday, Apple is expected to unveil its smaller screen iPhone and an updated iPad. The meeting is expected to start at 1 pm EST. Further election primaries continue as Arizona, Alaska, Idaho, Hawaii, Utah and Washington voters head to their presidential primaries and caucuses. Companies releasing earnings include Enel SpA, Hermes International SCA, Nike Inc. and Petroleo Brasileiro SA. European and U.S. markets are closed on March 25 as part of the Easter holiday.
A couple of observances in the ESM6 (S&P futures) Daily chart:
- 2045 VPOC (Virgin Point of Control) – Remember, a point of control is the level in the futures that is inside the value area where the greatest amount of volume traded in the prior session. A VPOC is a previous point of control that has never been touched or tested and can act as a “magnet” for price. Once the magnet is touched / tested price may then retreat away from it. The ESM6 closed at 2038 and is only 7 points away from this 2045 VPOC (see below).
- The RSI (Relative Strength Index) is now in overbought territory at 70.6. The last time we the RSI was over 70 on the ES was 11/3/15 which represented a 6 month high.
ESM6 – Daily Chart
Source: ThinkorSwim
ETF Flows for the Week
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Overall: Last week Equity ETFs saw +$8.6B in net inflows (prior week +$4.4B). Emerging Markets for the fourth week in a row saw heavy gains of +$2.4B. EEM (iShares MSCI Emerging Markets ETF) saw the largest inflow of any ETF last week at +$1.9B. Other EM ETFs that saw gains were EMB and EEMV.
In US sectors, there was a rotation out of Health Care ETFs, which lost -$1.1B last week, and into Energy ETFs, which gained +$687M in assets. Health Care ETFs that lost assets were FXH (First Trust Health Care AlphaDEX Fund) and XLV (Health Care Select Sector SPDR Fund). The Energy ETFs that had gains were FXN (First Trust Energy AlphaDEX Fund) and XLE (Energy Select Sector SPDR Fund).
High Yield Bond ETFs (HYG, JNK) saw more inflows of +1.9B and in commodities Gold (GLD) saw inflows of +$814M last week.
ETFs of the Week:
- XLI (Industrials): Industrials got a big boost from a weaker dollar which is something that plagued this sector over the last year. CAT (Caterpillar Inc) and DOV (Dover Corporation) both cut guidance last week only to see their stocks rally off the news. Perhaps the bad news was priced into their stocks. Last week we also saw a large call buyer in EMR (Emerson Electric Co.). However, looking at the technicals below indicates that the XLI ETF is getting overbought with an RSI of 74. I would watch for further weakness in the US Dollar as a positive for the Industrial sector and would add to companies in the XLI ETF that are not overbought – GE, GD, RTN, WRK
XLI – Daily Chart
Source: ThinkorSwim
2. EEM (Emerging Markets)
Emerging Market ETFs have now seen inflows for four consecutive weeks and EEM saw the highest inflows of an ETF last week +$1.9B. If the dollar continues its weakness and commodities continue to rally, Emerging Markets may further catch up to Developed Markets. On the weekly chart below, the price action is now inside the value area. The bottom of value is $33.39 and I would stay long with a stop price just under $33.39.
EEM – Weekly Chart
Source: ThinkorSwim
3. UUP (PowerShares DB US Dollar Index Bullish)
Last week the US dollar sold off as Fed Chair Janet Yellen signaled that there may be less interest rate increases in 2016 than originally thought. I am listing UUP as one of the ETFs of the week because it has many implications across sectors and commodities. In the chart below, the price action closed under the value area. The bottom of value is $24.77 and what was support is now resistance. If UUP stays below value, commodities, emerging markets, and multi-national companies may continue to outperform.
UUP – Weekly Chart
Source: ThinkorSwim
Stocks to Watch (from Pat Harris @pharris667)
1. NUAN (Nuance Communications, Inc)
Nuance Communications, Inc. provides voice and language solutions for businesses and consumers worldwide. It operates through four segments: Healthcare, Mobile and Consumer, Enterprise, and Imaging. Huge insider selling Friday all officers, SHORT IDEA
2. FICO (Fair Isaac Corporation)
Fair Isaac Corporation develops analytic, software, and data management solutions that enable businesses to automate, enhance, and connect decisions to business performance. With the market this High I like to concentrate on companies that have performed well this year.
3. STMP (Stamps.com Inc.)
Stamps.com Inc. provides Internet-based postage solutions in the United States. It offers solutions for mailing and shipping various mail pieces, such as postcards, envelopes, flats, and packages using a range of United States Postal Service (USPS) mail classes, including First Class Mail, Priority Mail, Priority Mail Express, Media Mail, Parcel Select, and others. With excellent earnings for the Last Two Years this one got an upgrade Friday and an interesting play and with the Market this high looking for Winners
4. FLT (FleetCor Technologies, Inc)
FleetCor Technologies, Inc. provides fuel cards, commercial payment and data solutions, stored value solutions, and workforce payment products and services. It sells a range of customized fleet and lodging payment programs; and offers card products to purchase fuel, lodging, food, toll, transportation, and related products and services at participating locations. Anybody notice how as the market goes higher there are fewer upgrades. This one got upgraded Friday and don’t know how much you have followed this stock but through the last couple years analysts haven’t always been on this company’s side so when I see 3 upgrades in the last two weeks have to sit up and take notice
5. TSLA (Tesla Motors, Inc)
Tesla Motors, Inc. designs, develops, manufactures, and sells electric vehicles and stationary energy storage products in the United States, China, Norway, and internationally. It primarily offers sedans and sport utility vehicles. My man Elon the Teflon man-Andrew Left of Citron research tried attacking this company in the last two weeks but didn’t last long He didn’t say any more or less than any other analyst has about production problems etc. and all that did was give people a buying opportunity. Most interesting thing I noticed in the last two weeks are Sweep call buying by Mutual funds even with the stock at this level. Announced his event for Model 3 Mar 31st. That’s two new introductions in a year
6. BMY (Bristol-Myers Squibb Company)
Bristol-Myers Squibb Company discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. Interesting that we saw sweeps twice this week
7. AAL (American Airlines Group Inc)
American Airlines Group Inc., through its subsidiaries, operates in the airline industry. Huge call buying Friday and many may not realize this but the largest airline company.
8. NKE (NIKE, Inc)
NIKE, Inc., together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories for men, women, and kids worldwide. The company offers products in eight categories, including running, basketball, football, men’s training, women’s training, sportswear, action sports, and golf under the NIKE and Jordan brand names. Reports this week problems with Kenya and Sharapova made this a buying opportunity as stock recovered last week company technicals still there.
9.WST (West Pharmaceutical Services, Inc)
West Pharmaceutical Services, Inc. develops, manufactures, and sells packaging and delivery systems in the United States, Germany, France, Other European countries, and internationally. The company’s Packaging Systems segment offers primary packaging components and systems for injectable drug delivery, including stoppers and seals for vials; closures and other components used in syringe; intravenous and blood collection systems; and pre-fillable syringe components. This segment also provides contract analytical laboratory services for testing and evaluating primary drug-packaging components with the contained drug formulation; and specialized testing for complete drug delivery systems. A new company researched this week caught in the Bio sell-off, this is not a bio but like what they do.
10. CPRT (Copart, Inc.)
Copart, Inc. provides online auctions and vehicle remarketing services. The company offers a range of services for processing and selling vehicles over the Internet through its Virtual Bidding Third Generation Internet auction-style sales technology to vehicle sellers, primarily insurance companies, as well as to banks and financial institutions, charities, car dealerships, fleet operators, and vehicle rental companies. The company sells its products principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, and exporters, as well as directly to the general public. Little different company I am watching with improved technicals. Interesting that this is an internet based company that keeps trending higher in the IBD Leaderboard rankings.
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