Market Giving A Free Pass To Weather & Ukraine, Heading Higher
The market decided to 'make it' instead of 'break it' - sets a new high.
The It's Make Or Break For Market At Highs, Do Or Die Time post proposed the market was having trouble moving higher. The hesitation was short lived and S&P 500 broke higher to 1883. But that's where it gets getting interesting.
Extreme cold weather and geopolitical Ukraine worries are in play. Here's the back story -
The market has given a free pass to disappointing economic data using the old retailer excuse of 'bad weather'. Extreme cold in January and February is being blamed for sour data from jobs to GDP. The consensus is bad weather is holding back demand which will be released in the coming months as things thaw out.
Geopolitical fears of tensions between Ukraine and Russia were quelled just as quickly as they flared up. Ukraine fears will rear their heads again (they are far from over) but will continue to be discounted by the market. There is no fear of another 80's style cold war at this point despite Putin flexing his shirtless muscle mounted atop of horse.
The weather and Ukraine will provide a push/pull the next few weeks. See WHAT WE EXPECT - HOW TO TRADE IT further down for how to play it all.
CURRENT MARKET ANALYSIS:
Price Action: Daily Chart price action continues to be strong. The bullish uptrend remains in tact and orderly. Bottom Line: Buy
Trading Volume: Volume levels remain healthy while expanding on days with a directional move higher or lower. The previous 2 weeks have seen positive buying volumes. Bottom Line: Buy
Market Technicals: The long term uptrend line held during the January selloff which is bullish longer term. Moving averages continue to be respected on any test. The market overall continues to respect technical and price levels which is bullish. Bottom Line: Buy
Market Fundamentals: Weather is being blamed for soft economic data causing pent up demand to provide a benefit in future months. Money Managers remain underinvested but fear of missing the next leg higher and continue to buy all dips. Bottom Line: Cautious Buy
Current Market Summary: The market overall remains healthy and constructive. With all 'Buy' signals for the categories above it is not an recommendation to go on margin or mortgage the house and buy buy buy! Rather, continue to take advantage of dips to reload longs and new highs to sell those longs. As long as the S&P 500 stays above the $1850 price level then things remain all clear. Bottom Line: Cautious Buy - be smart, take advantage of profit taking dips to reload longs
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VIX & VOLATILITY ANALYSIS:
Volatility Summary: The VIX continues to trade in the $14-$15. This is a step higher than last and indicates market volatility is expected to stay around for a while. Implied Volatility is narrowing the gap toward Historical Volatility and is attractive in the 11-13% range. Bottom Line: Volatility still attractive for selling premium
WHAT WE EXPECT - HOW TO TRADE THE NEXT WEEK:
Overnight and trading session dips are orderly and continue to be buying opportunities for short term traders. The market is giving a free pass to bad data due to weather and is not that worried about Ukraine, even if it means allowing Russia to take official control of Crimea.
A test of the S&P's 50 day moving average ($1850 price level) has been defended this morning and will likely be the foundation for the next leg higher. If the bears get things going $1830 would be the next level for the bulls to defend but a test of that level is improbable at this stage. Look for a test of the S&P high next week. $1900 will be the next area of real resistance.
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The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.