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Stock Market: Second Wind or Left a Little Breathless?

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February 13, 2015

Wall Street looks ready to grab Europe’s coattails today (a strong showing for Asian equities helps, too) as better-than-expected Q4 economic-growth numbers for Germany—we’re talking double the expectations—cheered officials already feeling a little bit better about the still-risky situation with Greece. Although talks between Greece and its creditors continue (will we find out more on Monday when U.S. markets are closed?), snippets in the financial press showed signs that the two sides are warming up to each other as they work to unhinge a deadlock over debt payments.

International geopolitical headlines and the oil market’s latest twists and turns have skunked headlines from earnings reports and even U.S. economic data. In one such example, it was brokered peace between Russia and Ukraine that largely helped send the S&P 500 (SPX) on Thursday up to within an eyelash of its all-time closing high of 2,090.57 hit in late December. I mean the SPX sliced through 2074 resistance like a hot knife through butter. The mini milestone is to knock out the record. From there? There’s little on the charts before 2100.

FIGURE 1: RECORD IN THE REAR VIEW? The S&P 500 (SPX), flirting with fresh record highs, took out 2074 Thursday. That leaves little in the way, at least as far as the charts are concerned, toward 2100. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.


Long Weekend Looms. So, while bulls seemingly have much working in their favor short term, we are staring down a long weekend. U.S. markets are closed Monday for President’s Day, potentially leaving some on Wall Street vulnerable to Greek debt headlines and more, and potentially encouraging some participants to assume cautionary positioning. It’s also true that stocks have to be viewed in a global context as the U.S. may have to shove over for an improving Europe? Too soon to tell. Keep an eye on the 10-year yield. It’s now over 2%. Stock investors are closely watching market rates. Is there a touchy area with the 10-year that suddenly reminds Wall Street that rates are tipping higher?

Crude’s Comeback. Crude oil futures rose sharply overnight and early Friday, with Europe-traded Brent crude testing the $60 line on reports of production spending cuts by oil companies (meaning the chance for less supply) and a pullback for the high-flying U.S. dollar. U.S.-traded crude futures contracts are back above $51 a barrel. Both Nymex West Texas Intermediate and ICE Brent crude settled 4% to 5% higher Thursday, snapping a two-day losing streak and posting gains for eight of the last 11 trading sessions.

A Look Ahead: Next week’s shortened economic calendar offers a couple of housing sector snapshots. These reports carry a bit more burden next week as they follow an ugly retail sales report. Investors will be looking to see if some of the reserved retail spending might show up in the housing market or if home data only serves to remind us that consumer confidence isn’t as strong as we might expect right now. Next week also brings the release of meeting minutes from the Federal Reserve’s January sit-down. We know from that meeting’s press readout that members continue to fine tune their communication of current expectations for the speed and depth of looming interest-rate hikes. Let’s see if the minutes shed some more light. Just a reminder: Monday’s market-closure holiday falls right before an options expiration, so options traders should be mindful of the calendar.

Good trading,
JJ
@TDAJJKinahan

JJ Kinahan

JJ began his career in 1985 as a Chicago Board Options Exchange...

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