STTG Market Recap February 19, 2014

After eight straight up sessions in a row the NASDAQ finally took a small break.  In fact, both indexes took a rest with the S&P 500 falling 0.65% and the NASDAQ 0.82%.  While various news outlets will find a “reason” the reality is it’s been another epic V shaped rally that needed a rest.   We had some economic news along with Federal Reserve news:

On the economic front, the Commerce Department said housing starts sank 16 percent to a seasonally adjusted annual rate of 880,000 units. The rate was the lowest since September. It was also the largest percentage drop in three years. The news came a day after home builder sentiment dropped 10 points, according to the National Association of Home Builders’ monthly sentiment index, logging its biggest drop in the history of the survey, which started in 1985.

Meanwhile any hint that the Fed might raise rates (which is very unlikely for a VERY long time) is prone to hit such an overbought market, and some vague wording about that came in today’s release of minutes from the last meeting:

Some Federal Reserve policy makers sought an early hike in its benchmark interest rate amid growing confidence in the US economy, minutes from their January meeting showed Wednesday.  The minutes of the Federal Open Market Committee meeting of January 28-29 revealed the group was increasingly upbeat, shrugging off fresh turmoil in emerging markets and judging that poor December employment numbers were mainly weather-related.   But in the first shift in months away from dovish caution in the FOMC, the minutes of the meeting disclosed a clear increase in members advocating monetary policy tightening this year.  “A few” members saw it appropriate to raise the Fed’s key interest rate “relatively soon”, amid rising market expectations of faster economic growth and rising rates even as inflation remains very low.

Here are longer term charts of our two indexes; it would appear if earlier patterns repeat at some point the NASDAQ is going to hit the top purple line.

spx

nasdaq

You can see with the NYSE McClellan Oscillator we went from extreme oversold conditions 2 weeks ago to extreme overbought conditions now.

nymo

BeSpoke has another indicator of the extreme overbought conditions per the 10 day advance / decline line.

It has been an impressive rally for equities over the last 10 trading days. The rally has been so strong that the 10-Day Advance/Decline (A/D) line for the S&P 500 is currently near its highest levels since at least 1990. The 10-Day A/D line is a breadth indicator that measures the 10-day rolling total of the daily net number of advancing stocks in the S&P 500. At a current level of +1944, the 10-Day A/D line is near its highest levels of the bull market. In fact, since 1990, the two periods in late 2009 shown in the chart are the only times the 10-Day A/D line has been higher than it is now.

Bespoke

After the close Tesla Motors (TSLA) exploded higher 11% on its earnings report; this helped offset the 5% loss in the normal session.

Tesla Motors (TSLA) capped 2013 with Model S sales above expectations and an outlook for this year that sped by views, too.  The company sees more than 35,000 deliveries in 2014, up at least 55% from the 22,477 cars sold last year. That amounted to nearly $2.5 billion in 2013 revenue for the luxury electric-car maker, ahead of the $2.4 billion analysts expected. Shares hit an all-time high of 206 on Tuesday. “Production is expected to increase from 600 cars/week presently to about 1,000 cars/week by end of the year as we expand our factory capacity and address supplier bottlenecks,” Tesla CEO Elon Musk said in the company’s letter to shareholders.

tsla

Facebook (FB)  fell in after hours on very heavy volume after the social-networking site announced it would buy WhatsApp for $16 billion in cash and stock, with an added $3 billion in restricted stock units over the next four years.  That said the stock held up great in the normal session.

fb

 

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