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Weekly market recap: Markets continue to rise

DIA - Week ending 5/24/14
DIA - Week ending 5/24/14
OptionsAnnex.com

Overview

For the week ending May 24, 2014, the markets made strong gains with the S&P500 posting another record high and closing above 1900 for the first time. Economic news was mostly positive, especially for Housing and Manufacturing.

Both Existing Home Sales and New Home Sales showed marked improvement, meeting and beating expectations respectively. Still, after 5 years into the recovery, real estate sales have not reached historic averages and are still below last year's pace (due partly to bad weather).

The PMI Manufacturing Index Flash is also up markedly, confirming the regional manufacturing reports from New York and Philadelphia. This counters the surprising decline in the manufacturing component of the Industrial Production report the prior week.

On the earnings front, as earnings season comes to a close, worse-than-expected results were posted by Staples and Urban Outfitters.

In The News

Apple sets a 52-week high on acquisition talks with Beats, which makes high-end headphones. The deal is for $3.2 billion, although there has been no announcement to date.

The conflict between Ukrainian troops and pro-Russian militants has escalate with just days before the May 25 presidential election. At least 32 people were killed in the Luhansk region.

Next Week

The economy continues to improve with expectations that economic growth will continue through the rest of the year.

The focus next week in the U.S. will be on the following: Durable Goods Orders and S&P Case-Shiller HPI on Tuesday; GDP and Pending Home Sales on Thursday; and Personal Income and Outlays on Friday.

Globally, with the increase in flash PMIs being offset by political uncertainty in Thailand and Ukraine, focus will be on the EU parliamentary elections on May 25 and consumer spending data.

We are expecting the markets to continue to improve next week if the election outcome in the Ukraine does not lead to further chaos and civil war. There is a moderate amount of economic data being reported, but no surprises are anticipated. Expect to see a rise in volatility if geopolitical concerns escalate.

Market Gauge

Year-to-date the markets are up: Dow 0.2%; S&P500 2.8%; Nasdaq 0.2%.

The Markets for the past week were: DJIA up 0.7%; S&P500 up 1.2%; Nasdaq COMP up 2.3%.

Commodities (ETFs) for the past week were: Gold (GLD) up 0.01%; Silver (SLV) up 0.27%; Oil (OIH) up 1.80%; Dollar (UUP) up 0.42%; 30-yr Bonds (TYX) rose 6 basis points to 3.40%.

The VIX this past week (a measure of market sentiment and volatility) dropped to 11.36% due to improved economic news.

Weekly Review

To see the week in review, go to the Econoday calendar.

On Monday, with little news, the Dow rose fractionally to 16,511.

On Tuesday, with hawkish comments from Philly Fed President Plosser and disappointing earnings announcements from Staples and TJX, the Dow dropped -0.8% to 16,374.

On Wednesday, with dovish statements from the FOMC and bargain hunting, the Dow rose 1.0% to 16,533.

On Thursday, with mixed economic news and a narrow range bound day, the Dow rose fractionally to 16,543.

On Friday, with a big jump in New Home Sales, the Dow rose 0.4% to 16,606.

Next Week's Calendar

To see what's on the calendar for next week, go to the Econoday calendar.

The economic calendar for next week is full: on Monday – closed for Memorial Day; on Tuesday – Durable Goods Orders, S&P Case-Shiller HPI, Consumer Confidence, Dallas Fed Mfg Survey; on Wednesday – nothing; on Thursday – Weekly EIA Petroleum Status Report, Weekly Jobless Claims, Pending Home Sales, FedSpeak; and Friday – Personal Income and Outlays, Chicago PMI, Consumer Sentiment, FedSpeak.

If the Markets move down, stay on the side lines or consider Contra ETFs. For Option players, selling premium is advised.

For more information about options, see the 'Suggested by the author' links below.

To the Charts

The following ETFs (DIA, SPY, QQQ) provide a technical review of the Market (and are also excellent Option trading vehicles). Represented are the Dow Industrials (DIA), S&P500 (SPY), and Nasdaq 100 (QQQ).

The Charts for each include views for Monthly, Weekly (including Price Channels), and Daily (including monthly Pivot Points) with MACD and Stochastic indicators. The Pivots are: white for central pivot point; yellow for R1 and S1; magenta for R2 and S2; red for R3 and S3.

DIA

The Dow Industrials (DIA) closed up at 165.83. If the DIA drops, then the next level of support will be at 159.88 (weekly chart); the next level of major resistance is 167.29 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD just positive, and the Stochastic moving up toward the midpoint.

SPY

The S&P500 (SPY) closed up at 190.35. If the SPY drops, then the next level of support will be at 181.31 (weekly chart); the next level of major resistance is 190.42 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up toward the overbought area.

QQQ

The Nasdaq 100 (QQQ) closed up at 89.88. If the QQQ drops, then the next level of support will be at 83.28 (weekly chart); the next level of major resistance is 91.06 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up at the midpoint.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.