For the week ending August 8, 2014, one CI Market Dashboard indicator was bullish, four were bearish and four were neutral. There were no signal changes this week, nor were there any confirming bearish or bullish signals.
After last week’s sell-off, the market spent this week seesawing in response to a variety of geopolitical and economic news. Things got off to a good start on Monday, with the market rallying around news that the Bank of Portugal would rescue Banco Espirito Santo and split the bank into two separate arms: one each for its troubled and healthy assets.
Sentiment soured, however, as a new buildup of Russian troops along the Ukraine border raised concerns that Moscow might be contemplating another intervention like the one that annexed Crimea earlier this year. According to NATO officials, Russia has amassed some 20,000 troops “in an area along the entire border with eastern Ukraine.” This was on the heels of last week’s increased economic sanctions against Russia by the U.S. and European Union for its support of pro-Russian separatists fighting the Ukrainian government. Adding to worries were plans by the Russian military to stage a week of military exercises involving air troops and anti-missile defense forces. The exercises are taking place in Russia’s southern Astrakhan region, roughly 500 miles from the border with Ukraine. Similar military exercises in the region preceded Russia’s annexation of Crimea in March.
On Wednesday, NATO issued a statement calling the situation a “dangerous” one, saying, “We’re not going to guess what’s on Russia’s mind, but we can see what Russia is doing on the ground—and that is of great concern.”
Separately, Russian President Vladimir Putin signed an executive order banning or limiting agricultural imports from countries that have imposed sanctions on Russia. Putin ordered his government to come up with a list of goods to ban for imports into Russia and to last one year, the Kremlin said. The order says the limits are being imposed “with the goal of guaranteeing the security of the Russian Federation” and calls for undertaking measures to guard against quick price hikes. The burgeoning trade war between Russia and the West has many wondering what the impact will be on global economic growth at a time when the global economic environment is still rather fragile.
On Friday, the international focus shifted to the Middle East. In Iraq, U.S. warplanes bombed Islamist fighters marching on Iraq’s Kurdish capital, the first U.S. air strikes on Iraq since U.S. forces pulled out in 2011. “We can act carefully and responsibly to prevent a potential act of genocide,” said President Obama.
The United States also dropped relief supplies to members of the ancient Yazidi sect, tens of thousands of whom are massed on a desert mountaintop seeking shelter from fighters who had ordered them to convert or die.
Fighting also resumed in Gaza just minutes after a 72-hour cease-fire between Israel and Hamas expired. Egypt is continuing its efforts to broker a deal, calling on both parties to maintain “self-restraint … and not [target] civilians in Gaza.”
However, in what is hopefully a mark of cooling tensions, Russia’s Defense Ministry said late on Friday that it had finished military exercises it was conducting near the border with Ukraine. The Interfax news agency reported that aircraft taking part in exercises have been redeployed from temporary to their permanent air bases and anti-aircraft missile units have started loading their load their equipment to depart to their permanent positions.
Looking at the U.S. equity markets, the Dow Jones industrial average (DJIA) carved out a 0.4% increase this week to close at 16,553.93. The blue chip index flirted with its 200-day moving average after dropping below intermediate support around 16,400 before rebounding off it on Friday. To the upside, round-number resistance at 16,600 is possible, while 16,400 looks to be initial support to the downside.
The S&P 500 Index (SPX) rose 0.3% to close at 1,931.59. The large-cap index came within range of round-number support around 1,900 but then closed above 1,925, which has offered support in the past. Seven of the nine S&P Select Sector SPDR ETFs were up this week, with cyclicals leading the way with a 1.08% gain, followed closely by materials, which gained 1.05% for the week. Healthcare and technology both were down for the week, surrendering 0.71% and 0.31%, respectively.
The broad market Wilshire 5000 (W5000) tacked on 0.44% this week to close at 20,436.16, having seemingly found support at the 20,250 level.
The Nasdaq Composite (COMP) added 0.4% this week and closed at 4,370.90. The tech index was unable to push back above its 50-day moving average and the 4,375 level appears to be developing into intermediate resistance.
Small-cap stocks roared back in a huge way this week, as the Russell 2000 jumped 1.48% to close at 1,131.35. It may run into resistance around 1,135, however, as it tries to fill in the price chart gap it formed with last week’s sell-off.
There was another wave of tech firms reporting quarterly results this week:
- AOL, Inc. (AOL): $0.45 per share reported versus the consensus estimate of $0.446 (+0.9% surprise)
- Cognizant Technology Solutions (CTSH): $0.61 per share reported versus the consensus estimate of $0.579 (5.4% surprise)
- Coupons.com Inc. (COUP): $(0.09) per share reported versus the consensus estimate of $(0.040) (-125.0% surprise)
- DISH Network Corporation (DISH): $0.46 per share reported versus the consensus estimate of $0.579 (-20.6% surprise)
- Groupon (GRPN): $0.01 per share reported versus the consensus estimate of $0.008 (+25.0% surprise)
- NVIDIA Corp. (NVDA): $0.22 per share reported versus the consensus estimate of $0.201 (+9.5% surprise)
- Symantec Corporation (SYMC): $0.45 per share reported versus the consensus estimate of $0.422 (+6.6% surprise)
- WebMD Heath Corp. (WBMD): $0.23 per share reported versus the consensus estimate of $0.19 (+21.1% surprise)
- Zynga Inc. (ZNGA): $(0.07) per share reported versus the consensus estimate of $0.002 (-3,600.0% surprise)
Looking back on some of this week’s key economic data and news:
- Last weekend the Bank of Portugal announced it would rescue Banco Espirito Santo, and split the bank into two separate arms: one each for its troubled and healthy assets. The Portuguese government will ante up the majority of the 4.9 billion euros needed to bail out the lender, but Banco Espirito Santo shareholders and creditors will also carry some of the financial load.
- The Institute for Supply Management (ISM) said service sector activity rose to a better-than-expected 58.7 in July. This was its fastest rate of expansion since December 2005.
- The Commerce Department reported a 1.1% rise in factory orders for June, topping economists’ forecast for a 0.6% increase.
- The U.S trade deficit fell 7% in June to $41.5 billion, largely due to a three-year low for petroleum imports. The trade deficit was little changed from the previous quarter: the average three-month gap was $44.4 billion in June, compared to $44.6 billion as of April.
- Initial jobless claims dropped by 14,000 last week to a lower-than-expected 289,000, according to the Labor Department. The four-week moving average of first-time unemployment claims declined to 293,500, a new eight-year low.
In terms of the CI Market Dashboard, the iShares Dow Jones U.S. Index Fund (IYY) gained 0.37% this week to close at $97.53. The ETF’s closing price bounced along its 100-day moving average for much of the week, which appears to be offering intermediate support.
To see what happened with the individual Dashboard indicators this week, visit the CI Market Dashboard site.