The sentiment on Wall Street has turned increasingly negative as uncertain outcomes with trade and government policies are fluid with the new administration. However, nothing has proven to be decisively bad as we got a reminder that the jobs numbers continue to grow with +151k added in February.
One negative is the worsening trade deficit (-$131.4B vs. -$98.4B prior) as tariff concerns likely created an influx of goods which will negatively impact Q1’s GDP. However, we are seeing companies begin to make plans to on-shore manufacturing activity as pledged by Apple, Oracle and most recently Taiwan Semiconductor which will be good for the US economy in the coming years.
The S&P 500 Chart
The negative sentiment is pervasive as stocks have been trading in a range for over four months over policy uncertainty (rates and deficit). However, negative sentiment is typically found near a bottom in stocks and not a top.
As you can see in the chart below of the S&P 500 futures, there has been several spike and reversals within a defined range of resistance and support. At the bottom right of the chart, you can see we started trading through the Support Zone on Tuesday but the S&P held on through the Friday close. One notable is that buyers started showing up around the 5700 area and it is a good sign that we didn’t plummet after breaking the lower boundary at 5775. Some further upside in Monday’s trading would provide additional evidence that a low is forming.
A very tough market to navigate but there should be some technical clarity in the coming sessions as downside momentum looks to be slowing.
I will have some commentary next week on the bond market as we will get additional inflation data this week that may give us a clue on what the Fed will say on March 19th.
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Paul J McCarthy III CFA
President, Kisco Capital
