U.S. stocks last week as measured by the S&P 500 and as represented by the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) came under some pressure but all in all remain in a choppy multiweek range. How much longer this will last is anyone’s guess, but the coming week does have at least one notable catalyst on the horizon worth paying attention to.
On Wednesday we get the Federal Reserve’s latest statement, outlook as well as the FOMC chairman’s (Jerome Powell) comments from a press conference. While many money managers I am speaking to will be listening to Mr. Powell’s language to gauge his level of hawkishess, I want to closely watch the reaction not only in interest rates, but also in financial stocks, which are an important part of the overall stock market.
From a seasonal perspective, so you know stocks are now in a bullish phase historically speaking … at least through the month of April. This is to say that although volatility has spiked in January and February, all else being equal, the intermediate-term trends for stocks remains to the upside. Looked at a different way one could say that the burden of proof still lies with the bears to show that stocks really could make lower highs versus their January highs.
Chart for the Week
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
With this backdrop in mind, note that the SPY ETF on the below multi-year chart in January had a blow-off rally that pushed it out and above the up-trending channel. This ultimately led to the February mean-reversion move lower. The bounce of the February lows now has the SPY ETF back at the upper end of said channel.
From where I sit through the lens of technical analysis it looks somewhat unlikely that the S&P 500 will be able to sustainably push above the January highs, which however is not to say that individual pockets of stocks won’t be able to achieve this.
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
One part of the stock market that continues to look and act both relatively and absolutely strong is technology. Within the technology sector, the semiconductor stocks and in particular Nvidia Corporation (NASDAQ:NVDA) still look giddy to make higher highs. On the chart, note that NVDA stock has been consolidating below its February highs for the past few days, all the while still making higher lows as pointed out by the green arrows.
In summary, while the broader stock market remains in a choppy period since late January, individual pockets of stocks and notably so in the semiconductor space still act good enough that the up-trend cannot be disrespected. Pick your sector and group of stocks carefully.
Check out Tyler Craig’s Trade of the Day for March 19.
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.
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