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After more than 40 years on Wall Street, Marc Chaikin founded Chaikin Analytics LLC in 2009 to deliver proven stock analytics to financial service professionals and individual investors. With the Chaikin Power Gauge, an alpha-generating quantitative model as its centerpiece, Chaikin Analytics... More
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  • Chaikin Market Insights - August 16, 2014 0 comments
    Aug 18, 2014 5:43 PM

    AUGUST SCHEDULE: I am on vacation through September 1st. We will issue a shortened Market Insights on the following modified schedule the next 2 weeks:

    Thursday 8/21
    Wednesday 9/3

    Enjoy the end of summer and thanks for your support.
    - Marc

    Market Runs into Selling at the Critical 50 Day Moving Average

    The S&P 500 Index closed at 1,955.06, up 1.22% on the week. The market was cruising along with a strong weekly gain and was trading well above its closely watched 50 day average price when the rumors of an Ukrainian attack on a Russian humanitarian supply convoy hit the news wires at 10:30 a.m. on Friday. After a steep 1% decline and a subsequent rally, the S&P 500 closed unchanged on the day, and just under resistance at 1,957.

    The stock market is much more volatile when geo-political risk is combined with low volume dog days of August trading as we saw on Friday. Our belief in a re-test of the August 7th lows of 1,905 in the S&P is less certain given the market's ability to break above resistance at 1,955 before the rumors hit the tape.

    While the possibility of renewed selling is still a concern, it would probably be triggered by a heating up of the Russian - Ukrainian standoff and that is impossible to predict. One clue which suggests that cooler heads may prevail is that the sanctions imposed by the U.S. and Europe are a serious blow to the Russian economy and something that Vladimir Putin may not want to exacerbate. There was talk in the weekend press of Kremlin disapproval with Putin.

    That said, the market will still have trouble getting above 2,000 on the S&P 500 before September. The underperformance of the small-cap stocks suggests that caution is still in order, with rallies presenting a good opportunity to raise cash ahead of the negative September - October time frame.

    The Chaikin Power Bar differentials for the major Indexes improved this week for the S&P 500 Index and the Nasdaq 100, as seen in the graph below. The Russell 2000 small cap Index reverted back to the poor relative performance that it has shown for the past 6 months. The IWM was up only 0.91% on the week and was particularly hard hit on Friday when rumors of a Ukraine attack on a Russian supply convoy hit the tape. The Power Gauge net difference for the IWM actually deteriorated for the week indicating weakness under the cover of the broad market rally.

    (Index Power Bars from Chaikin Analytics)

    What's in Store This Week?

    This week the market will be influenced by four things:

    a. Russia's actions or inaction in the Ukraine
    b. The CPI inflation report due out on Tuesday
    c. The Fed's tone in the minutes of the last Federal Reserve Open Market Committee meeting due to be released on Wednesday
    d. Janet Yellen's keynote address at the Fed's annual Jackson Hole Wyoming conference on Friday

    With many market participants on vacation, expect volatile swings up and down all week.

    ETF Sector Update

    The heavily oversold Utility sector (NYSEARCA:XLU) continued its rebound last week, but the leaders of the broad market rally were Health Care (NYSEARCA:XLV) and Technology (NYSEARCA:XLK) sectors. The Nasdaq Composite reflected that as well; it was up 2.15%.

    (SPDR Sector Chaikin Power Bars as of 8/14 from Chaikin Analytics)

    This Week's Earnings Reports

    Earnings season ended last week when Wal-Mart (NYSE:WMT) reported on Tuesday. It was a positive earnings season, particularly so because expectations were high. More than 60% of S&P 500 stocks exceeded both revenue and earnings expectations, but in general investors used these better than expected earnings reports as an excuse to take profits.

    To read more of Marc's Weekly Insights, visithttps://www.chaikinpowertools.com/market-insights.shtml.

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