The Bull is Alive but Needs to Get More Aggressive

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Stocks ended Tuesday on a sour note with all of the major indices in the red. However, only the Dow industrials’ turned in a negative performance for the quarter. Its triple-digit decline took it to a 2% loss for March and a 0.3% loss for the quarter. The S&P 500 gained 0.4% in Q1, and the Nasdaq was up 3.5%.

The underperformance of the Dow so far this year was mostly attributed to the strength of the U.S. dollar. The greenback gained 10.8% against other major currencies in Q1, and last week was up by as much as 17%.

Disturbing but minor technical problems stopped trading in a number of exchange-traded products. Among those impacted were ProShares, iShares, SPDR and Direxion. No one claimed a serious loss as a result of the glitch.

All of the S&P’s sectors were down except utilities. But some, like the iShares Dow Jones US Home Const. (ETF) (NYSEARCA:ITB) only gave up a gain on the close. The sector was supported by a 1.7% rally in D.R. Horton, Inc. (NYSE:DHI) on an analyst upgrade.

The U.S. dollar rose 0.3% on Tuesday against a basket of 16 currencies. Year to date, the euro is down 11% against the greenback. Many economists are of the opinion that the U.S. employment data on Friday will result in an interest rate increase. The market will be closed for Good Friday that day.

Gold for June delivery fell 0.2% to $1,183.20 an ounce. Oil prices were sharply lower as negotiators indicated that a deal with Iran was likely. If finalized, Iranian oil exports would likely rise. The talks were due to expire on Tuesday, but it was agreed that they would be extended through next Wednesday. Light, sweet crude settled down 2.2% at $47.60 a barrel.

The Conference Board’s consumer confidence index rose to 101.3 in March. The consensus expected it to hold at 96.4. The S&P/Case-Shiller home price index for January rose 4.6%, which met expectations.

At Tuesday’s close, the Dow Jones Industrial Average fell 200 points to 17,776, the S&P 500 dropped 18 points to 2,068, the Nasdaq was off 47 points at 4,901, and the Russell 2000 declined 5 points to 1,253.

The NYSE’s primary exchange traded 965 million shares with total volume of 3.3 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board, decliners outpaced advancers by 1.4-to-1, and on the Nasdaq, decliners were ahead by 1.5-to-1.

S&P 500 Chart
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Despite the roller coaster of daily prices, our trusty long-term S&P 500 17-month moving average (MA) chart shows that the bull is still in his pasture. At 6% above the 17-month MA, there is not much room for error.

At the end of December, the S&P was 9.2% above the MA, and at the end of January, following a negative month, it was at 4.6%. In February, it read 8.9%, and I said, “The S&P 500’s premium of 8.9% above its 17-month moving average is on the high side, though not as high as November’s 10.9% or December’s 9.2%.”

In other words, we should have anticipated a pullback to a more normal price premium over the moving average, i.e., a reversion to the mean.

Conclusion

There may be more reversions to the mean before April is behind us. However, the statistics for April are very positive. The S&P 500 has closed higher 70% of the past 20 Aprils, which places it at the top of the monthly performance. But buyers will have to be more aggressive than on Tuesday if we are to meet that standard.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2015/04/daily-market-outlook-bull-alive-but-needs-to-get-more-aggressive/.

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