The markets opened higher across the board this morning with the major indices and all sectors positive at the start. The bombing of Syria came and went, and if nothing else kept the media busy over the weekend. After five daily gains last week crude oil retreats nearly 1% as Middle-East tensions subside for now. All sectors are currently positive including Energy, adding +0.7% to last week’s 6% surge and seeing strength in Industrials, up 1.0%. Earnings will increasingly come into focus through the week as about 213 members of the Russell 3000 index are expected to release their results. In the meantime gold is 0.3% higher while the dollar index is 0.4% lower, and treasuries are weaker with yield on the 10-yr inching up to 2.852%
- Retail sales beat expectations in March with an 0.6% increase over February’s -0.1% decline. Ex-autos was as expected at +0.2% and the control group also came in as expected, rising +0.4%. Sales in eight of thirteen categories rose with health and personal-care stores rising 1.4%, the most in two years, and auto sales rose 2%. At the other end of the spectrum building-materials fell 0.6%, apparel down 0.8% and sporting goods, books, music and hobby stores fell 1.8%.
- Investors shrugged off the U.S.-led military strikes against Syria’s chemical-weapons facilities Friday and focused their attention on a busy week of earnings. Worries ahead of that missile launch added to Friday’s market’s decline. Corporate heavyweights, including Netflix (NFLX), JNJ, GE and IBM will all report this week. We will see over 60 S&P 500 names report this week including 7 members of the Dow Jones Industrial Average. A strong earnings season could help propel this market higher but if earnings slide, look out below…
- Today is the first full week of the Q1 earnings season. According to Factset earnings are projected to increase 17.3% which would be the highest earnings growth rate since the first quarter of 2011. So far 33 of the S&P 500 have reported earnings with 78% reporting a positive earnings surprise and 22% reporting a negative earnings surprise
- The New York State Empire Manufacturing Index fell to 15.8 in April from 22.5 in March indicating a slowdown in manufacturing growth. The main driver of the shortfall was new orders which fell to 9 from 16.8
Technical Take : Bitcoin could be ready to trend
Most recent newbies to bitcoin cannot be feeling good about their investment. Today’s prices were first reached six months ago in November 2016 as the world’s most famous cryptocurrency was in the midst of a parabolic move to the upside. Bitcoin then went on to gain another 134% in less than four weeks’ time before reaching its all-time high of 19,511 in December. For calendar year 2017 bitcoin gained 1,403% and with it attracted a ton of interest from all walks. Unfortunately for the newcomers, bitcoin gave back 70% to its YTD lows in early February and likely shook out many weak hands arriving late to the party. Although bitcoin does not have an extensive price history, it did experienced declines of 90% in 2011, 50% plus in 2013, and more than 80% in 2014. In that context the recent 70% decline is par for the course. Early speculators with the longer term horizons and the ability to ride out severe drawdowns were rewarded handsomely. Today’s chart shows signs the bottom for bitcoing may already be in. At bitcoin’s recent low made in February, it formed a large, dragonfly doji reversal pattern on the weekly time frame. The pattern was carved out along its rising 200-day sma, textbook price action, which it tested for the first time since October 2015. Over the next two weeks it rebounded +98% before stalling at its declining resistance line connecting the December and January highs. This top occurred at 11,790 which “coincidentally” was also a clearly defined resistance level over nine consecutive sessions in mid-January. Reaffirming the importance of this resistance, two weeks later bitcoin retested it a third time in early March and again failed.
Click the image for larger view
The recent lows in late March/early April have taken bitcoin back below its 200-day sma, which to the “nothing good happens below the 200” crowd is a bearish signal. However the slope of this long term trend indicator is clearly ascending. Last week bitcoin gained 19.7%, its best weekly gain since peaking in December, while closing the week back above its 200-day sma. This proved to be a strong confirmation of the prior week’s inverted hammer bottoming candlestick which has received little headlines in the TA community. Today bitcoin spiked another 6% before running into supply at a cluster of technical resistance representing its declining trendline (white arrows) and the price gap starting at 8,328. It now resides just above its 200-day sma which potentially could be the level longs stake a claim. Overbought momentum readings across all time frames have already normalize. Two other notable items: (1) there was no bearish divergence (weekly period) at the December high, and (2) the weekly Bollinger bands are rebounding from a three year lows. The former argues THE top has not been made, while the latter suggests a breakout above the above the intermediate resistance levels could be accompanied by powerful momentum. Key near term resistance is at the top of the gap, 9,153, followed by 11,792.
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