"Double top", "Empire Manufacturing survey", "FOMC decision", "CPI data", "Philly fed"

Though double top cannot be ruled out, Bulls still control the equities since 2/8 bottom. US dollar and  Japanese yen are softening and the euro is showing signs of bottoming. But Gold and commodities have been the losers this week. Long term treasuries, TLT, respected the support at $89.

Since oscillators for the equities are in overbought zone and the equity Put/Call ratio is at the lowest, we can anticipate at least a slight pullback in the rally this week or a broadening of the top. Look for leadership from Nasdaq and the small caps however. US REITs showed extra strength this week

Will the small caps be able to pull SP500 and other global indexes any higher? Emerging markets, Europe and commodities have not broken above January highs still.

Retail sales came in better at 0.3% compared to expected 0.2%, but the lower reading on Michigan consumer sentiment dashed the rally on Friday.

Last week's (week over week) market Sectors Returns and Internals:

• SP 500: 0.99%
• Volatility Index change, VIX = 0.91%
• Short term bond rate (average of 3 year and 5 year) = 1.96%
• Small Cap (IWM): 1.65%
• 
  
• Latin America (ILF): 1.27%
• Europe (IEV or EFA): 1.19%
• Emerging Markets (EEM): 1.03%
• 
  
• Commodities (DBC): -1.75%
  
• Long term Bonds (TLT): 0.23%
• US Dollar Index, 8 DMA =80.29
• Gold, (GLD) 8 DMA = -2.58%

NYSE (New Highs - New lows), 8 DMA = 340.41
10 year Treasury yield = 3.71%

Put/Call Ratio, total of equity/Index = 0.91
Bull/Bear Ratio, Investors Intelligence survey =1.9

Next Week's economic calendar:

• Empire Manufacturing survey - 3/15
• FOMC Rate Decision - 3/16
• Core CPI, Philly Fed - 3/18

"Inventory levels", "Retail Sales", "Trade Balance", "Gold Bugs"

 Small cap soared more than 6% last week, indicating the increase in risk appetite among investors. Dow too joined the party after being behind. All 4 indexes, SPY/QQQQ/DIA/IWM are all back above their 50 DMA. VIX dipped by 10.67%. Though breadth has been increasing, some more volume would have made the rallies more justifiable. Only US equity markets seemed to have turned green for the year with many countries, particularly emerging markets, still struggling to move to green for th year.

US dollar and Yen are slowing down, and Euro consolidating at $1.35 range. The dollar may soon test support at 79.6 or its 50 day moving average. May be the carry trade is resuming and hence making bullish ways for commodities and equities. Gold too showed bullish signs. The Greek Austerity measures has provided hopes for Euro zone recovery, and this was well reflected in more than 5% return on EFA.

We have come to expect Mondays to be friendly for equities and we may see that March 8th too. But with such a sprint in the past week, we can expect a breather next week. While all indexes other than small cap have not surpassed January highs, let us hope the internals improves along with the price rallies.

Last week's (week over week) market Sectors Returns and Internals:

• SP 500: 3.1%
• Volatility Index, VIX = -10.67%
• Short term bond rate (average of 3 year and 5 year) = 1.89%
• Small Cap (IWM): 6.08%
• 
  
• Latin America (ILF): 4.81%
• Europe (IEV or EFA): 5.05%
• Emerging Markets (EEM): 5.11%
• 
  
• Commodities (DBC): 1.31%
  
• Long term Bonds (TLT): -1.21%
• US Dollar Index, 8 DMA =80.45
• Gold, (GLD) 8 DMA = 1.26%

NYSE (New Highs - New lows), 8 DMA = 265.15
10 year Treasury yield = 3.69%

Put/Call Ratio, total of equity/Index = 1.01
Bull/Bear Ratio, Investors Intelligence survey =1.85

Next Week's economic calendar:

• Inventories - 3/10
• Trade Balance - 3/11
• Retail Sales, Michigan Sentiment  - 3/12

"dragging Dow (DIA) and springing small cap (IWM)"

Dow has been a drag on the stock markets this week, but the small cap and NASDAQ have been leading the charge on the Bullish side. But the late day fade off in the recent two days is alerting a caution for the Bullish side. Internals are not boding well with the rally - Breadth, NYSE ticks and volume differential are not in harmony with the equity rally. But declining dollar is helping the cause for rallies in stocks and commodities.

"ISM Index", "Unemployment Report", "Greece Bailout Plan", "ISM Non Manufacturing Index"

The US dollar has been losing steam and that has been fueling equity/commodity rallies. Though the price decline is not much in the dollar, the momentum is declining. If nothing else is considered, then this should be positive for equities next week. But, there are many more economic reports that can influence the equities next week starting with ISM index on Monday and ending with Unemployment report on Friday.

But dollar strength or weakness is so much dependent on the news from Greece and Spain currently. The plan to reduce Greece's debt to 9% of GDP will be proposed this week. The Fed's beige book is not expected to add any new news.

Also note that Gold is consolidating around $1100 and may initiate a new rally if dollar declines from here. Notable however is also that long term treasuries are holding up well above the resistance. Both Gold and Long term treasuries respecting support indicates to me that "flight to safety" (may be from Europe) is still in play. 

GDP revised higher for Q4 2009
Consumer sentiment weakens in Feb 2010
Bernanke announces that Interest rate might be on hold for a while

Last week's (week over week) market Sectors Returns and Internals:

• SP 500: -0.42%
• Volatility Index, VIX =19.5
• Short term bond rate (average of 3 year and 5 year) = 1.83%
• Small Cap (IWM):-0.41%
• 
  
• Latin America (ILF): -1.25%
• Europe (IEV or EFA): -1.42%
• Emerging Markets (EEM): -1.07%
• 
  
• Commodities (DBC): -1.34%
  
• Long term Bonds (TLT): 2.48%
• US Dollar Index, 8 DMA =80.51
• Gold, (GLD) 8 DMA = -0.04%

NYSE (New Highs - New lows), 8 DMA = 128.23
10 year Treasury yield = 3.61%

Put/Call Ratio, total of equity/Index = 1.03
Bull/Bear Ratio, Investors Intelligence survey =1.76

Next Week's economic calendar:

• ISM Index, PCE prices - 3/1
• Auto Sales  - 3/2
• ISM services, Fed Beige book -3/3
• Unemployment report - 3/5

"Broken Correlation of US dollar and equities", "Case schiller 20 city index", "GDP report", "Durables Reports"

Is the anti-correlation between US dollar and the US equities broken? Last week we had both US dollar and the equities/commodities rally together. So either the anti-correlation is broken or one of the rallies is fake. It could be possible that the short-Euro could have been squeezed on Friday and hence Euro refused to bow down. All in all, there is much to distrust the recent rally in equities and commodities. However S&P 500 is hovering around 50 day moving average, and a decision is to be made - to stay above 50 DMA or below 50 DMA.

The holiday shortened week was a good one for equities. Many of the Asian traders were off for the week on Chinese new year and you should not forget that Shanghai Index is one of the indexes that is leading the equities downward. The Feds made a bold decision to increase the Discount rate, but the market recovered in its stride by early Friday morning. Manufacturing and Industrial production data was decent too. IMF announced that it will sell the remaining 191.3 tonnes of Gold.

Technically speaking the equities are little stretched on the long side, and they are facing 50 DMA. Interesting to see the conviction of the bulls here since we did not see big volume in the rallies last week. Money flowed into the equity funds last week and the price action was positive. The dollar strengthened, and yet the commodities continued to roll.

Last week's (week over week) market Sectors Returns and Internals:

• SP 500: 3.13%
• Volatility Index, VIX = 20.02
• Short term bond rate (average of 3 year and 5 year) = 1.995%
• Small Cap (IWM): 3.34%
• 
  
• Latin America (ILF): 4.05%
• Europe (IEV or EFA): 2.64%
• Emerging Markets (EEM): 2.45%
• 
  
• Commodities (DBC): 4.04%
  
• Long term Bonds (TLT): -0.82%
• US Dollar Index, 8 DMA =80.20
• Gold, (GLD) 8 DMA = 2.25%

NYSE (New Highs - New lows), 8 DMA = 108.23
10 year Treasury yield = 3.78%

Put/Call Ratio, total of equity/Index = 0.8
Bull/Bear Ratio, Investors Intelligence survey =1.28

Next Week's economic calendar:

• Case-Schiller 20 city index  -2/23
• New home sales  - 2/24
• Durable Orders - 2/25
• GDP, Existing Home sales - 2/26

"Housing Starts", "Building Permits", "CPI PPI report",

The S&P 500 held above 1050, the last week's low point. And in fact, the index rallied upto 1075. But the rally of 25 points in S&P 500 did little to improve the internals like New Highs - New lows or the Advance-Decliners. The volume in the indexes was not massive either. Naturally we tend to not emphasize the rally much. Notable however was the strength in NASDAQ and IWM (small cap) with respect to S&P 500 and Dow Jones Index. May be IWM and NASDAQ indexes can provide a shorting opportunity this week if we get an indication for market weakness earlier in the week.

China raised the reserve requirements for the second time to reign in on the overheated economy. Greece is looking forward for anyone to help and the elusive package from EU's help may not be sufficient.

Good News: Retail sales were up in January. Jobless claims for first week of  February declined more than expected. Google announced new Buzz.

Bad News: Euro currency is in a spiraling downwards, with the PIIGS screaming for help. The safe currencies are being harbored by the "flight to safety". Interesting to note that Gold is heading to decision point in the form of a triangle. Bernanke announced that the Feds will take steps to dismantle the extra boosting the economy received. The recalls now extended to Honda as well. That ought to help American car makers, whenever the Auto sales pick up.



Last week's (week over week) market Sectors Returns and Internals:

• SP 500: 0.87%
• Volatility Index, VIX = 22.73
• Short term bond rate (average of 3 year and 5 year) = 1.865
• Small Cap (IWM): 2.95%
• 
  
• Latin America (ILF): 4.49%
• Europe (IEV or EFA): 1.77%
• Emerging Markets (EEM): 3.33%
• 
  
• Commodities (DBC): 2.86%
  
• Long term Bonds (TLT): -2.35%
• US Dollar Index, 8 DMA =79.93
• Gold, (GLD) 8 DMA = 2.25%

NYSE (New Highs - New lows), 8 DMA = 39.82

10 year Treasury yield = 3.69%

Put/Call Ratio, total of equity/Index = 0.86
Bull/Bear Ratio, Investors Intelligence survey =1.31

Next Week's economic calendar:

• Housing Starts, Building permits, FOMC minutes -2/17
• Core PPI  - 2/18
• Core CPI - 2/19