Despite the break from the polar vortex, trading was frozen last week. Was the weekend warm enough to thaw the markets before the next freeze?
Last week the US equity markets traded in a tight range. The S&P 500 traded in a range just under 23 points from high to low. Typically that range is 36. A spate of less than encouraging economic data from the US was “explained” by weather related issues. This week data will stream in with Consumer Confidence and Case-Shiller Housing Price Index on Tuesday; New Home sales on Wednesday; Durable Goods and Jobless Claims on Thursday; US GDP on Friday.
Special attention will be paid to European data this week, as a European Central Bank policy decision is expected on March 6, next week. This Friday, inflation and employment figures for the Euro area will be released. The ECB has hinted that further stimulus hinges on data that demonstrates inflation (or lack of) trends. So far German business morale rose in February despite negative predictions.
The S&P 500 looks to test bullish and bearish traders resolve in the near term. The index has just about erased the sharp losses seen at the end of January. The price action for the past two weeks has been pretty firm to the upside. A quick glance at the chart and you will struggle to find any indecision in the markets in the past two weeks. However, we are again close to the highs which the market has failed to push higher this year. This is where the last sell off occured. With the earnings season all but over, investors have little excuse to not show their cards at this point. There is the possibilty that it is a sideways trade if traders fail to put their money where their mouths are. Does the market pop, drop, or lock?
Chart Courtesy of StockCharts.com
The recent lows around the 1740 area might show some pause if there is a drop. However, look for any indecision at this level to be short lived as the market has been there before very recently. On the upside, there is pretty much clear air since the market is close to all time highs. Therefore, if the market can break out of the resistance that it is at now, it is not clear where it might stop. That being said the S&P 500 may end somewhere in between 1797 and 1875. Hopefully the next polar vortex doesn’t freeze your trading.
Good luck and trade rationally.