The S&P and Mutual Fund Monday

on March 10, 2015

Positive economic headwinds and the continued pounding of the drums by the Federal Reserve that it’s going to raise interest rates soon don’t seem to be affecting investors’ appetite for the stock market.

With the S&P 500 futures (ESH15:CME) down six out of the last eight sessions and the weak close on Friday, most traders expected to see weakness going into Monday’s trade. The E-mini traded down to Friday’s 2066 lows during Globex but started to short-cover prior to Monday morning’s 8:30 CT open. The Dow futures (YMH15:CBT) closed up 109 points or +0.8%, the S&P 500 futures (ESH15:CME) closed up 7.00 points or +0.50% while the NASDAQ futures (NQH15:CME) closed up 8.50 points or just 0.3%. Yesterday’s gains followed a 1.4% decline in the S&P in the wake of Friday’s strong jobs report, which raised expectations that the Federal Reserve may raise interest rates as soon as June.

Overall it was a very slow day for the markets. Mondays have a reputation for starting out the week slow, and yesterday’s trade was a great example. For most of the day the S&P futures were stuck in a narrow range while crude oil continued its big rallies and drops. On the other side of the coin, the S&P 500 has had a difficult time in March. After the S&P 500 futures got close to their all-time contract high in the beginning of the month the index started moving back down. Prior to yesterday’s close the S&P had been down six out of the last eight sessions. After all the big ups and downs, both the Dow and the S&P 500 are up 1% on the year. Another thing possibly helping push stocks lower was last week’s push by the NASDAQ composite trading to the 5000 mark, a price not seen since the 2000 tech bubble.

With the anticipation hype over the Apple Watch release now coming to a close, the weakness in crude oil is coming back into focus in two ways: first, the usual worry about energy sector weakness, which may or may not have been part of the overnight drop, and second, some fresh buying of energy sector stocks now that they are cheaper.

January’s JOLTS survey is the major report due today, other than wholesale inventories, which look to be down slightly. The JOLTS is expected to show a further rise in the number of unfilled positions in US companies: over 5 million, the highest level since 2001. A lot of unfilled positions and a lot of people back on the active job market bodes well for the economy as a whole. Some analysts are even calling for unemployment to drop below 4% by 2016.

In other words, while the selloff continues, we’re not too worried about it turning into a larger correction. The US economy is recovering nicely.

PitBull Unplugged

In Asia 9 out of 11 markets closed lower and in Europe 11 of 12 markets are trading down this morning. Today’s economic reports include Redbook, NFIB Small Business Optimism Index, JOLTS, wholesale trade and a 3-year note auction.

Turnaround Tuesday up 7 of the last 12

Our view: The ESH15 rallied yesterday, but it doesn’t feel like this selloff is over yet. As we write, the E-mini has just dropped below 2066 and may head as low as the major support area around 2040-2045. It’s so thin it doesn’t take much to push the S&P up or down.

I have always paid attention to the euro and I can’t believe my eyes. The euro traded down to 1.0826 in Globex in the early goings last night. Remember a few years ago when people were pouring into the euro? Now it’s puke city. If there was ever a time to go to Europe it’s now. What’s the cost of a round-trip ticket from Fort Lauderdale International Airport to Milan, Italy? I can do the OP from a cafe sipping espresso, right? Sure I can. Our view is to buy the early weakness and sell the rallies.