Not entirely unexpectedly, last week’s equity market performance once again sent shudders of doubt into the collective mindset of investors. Honestly, it was not good for anyone long the market and hoping for a renewed assault on all-time highs. Not only did the Nasdaq lose ground everyday last week, volume accelerated into the close of the week. The S&P 500 and Dow Industrials did marginally better by posting two days of gains out of five last week but both indices still managed a losing week.
The primary culprits for the weakness, evidenced by equity markets, are earnings, economic data and the Fed.
For the first earnings season in many, investors cannot point the finger at geopolitical themes as a source of investor skittishness. No, this earnings season it is about our domestic economic and corporate travails.
On the week the Nasdaq lost 2.7% while both the Dow Industrials and S&P 500 lost 1.3%. Of particular importance, the Nasdaq also managed to close below both its 50 DMA and its 200 DMA. It was a dreadful week despite better than expected results from BIDU and AMZN among others. The broader market has failed in its repeated attempts to trade through resistance and in the case of the Nasdaq has set lower closing highs.
As you know my caution continues to be confirmed by weak price action and technicals that speak to a path lower.
Despite lowered expectations and a solid start to earnings season the sledding appears to be getting more challenging for equities. In spite of the possibility of a positive surprise out of TSLA, BABA, PCLN and/or FIT, I continue to believe that given the repeated fails at a break above resistance by all three major equity market indices, coupled with weaker than expected Q1 data and waning investor enthusiasm, the market looks exhausted an headed lower.
This week’s economic calendar will be employment-centric. Wednesday we receive the Gallup US Job Creation Index and the ADP Employment Report. Thursday we receive the Challenger Job-cut Report and the Weekly Jobless Claims. On Friday we receive the all-important employment data.
I would not at all be surprised to see more weak price action this week coupled with a jolt of renewed volatility.