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Stocks Bend But Don’t Break; Oil Recovery Continues

By CMC Markets (Colin Cieszynski)Market OverviewJan 28, 2016 09:51
ca.investing.com/analysis/stocks-bend-but-don%EF%BF%BD%EF%BF%BD%EF%BF%BDt-break;-oil-recovery-continues-381639
Stocks Bend But Don’t Break; Oil Recovery Continues
By CMC Markets (Colin Cieszynski)   |  Jan 28, 2016 09:51
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Sometimes things come better late than never. I had originally planned to use the title above for my Asia Pacific note yesterday afternoon but that plan was stymied by the late day selloff in US indices.

Overnight, however, trading conditions have improved for the most part. Despite the downward momentum coming out of the US, stocks in Hong Kong and Australia moved higher overnight and another selloff in China was once again contained to mainland indices. This morning, US stock index futures are essentially flat, refusing to follow European markets lower while crude oil is climbing again.

Between the dovish FOMC statement yesterday, the huge increases in US oil inventories, mixed earnings, soft guidance, and ongoing market turmoil in mainland China, bears have every reason to grab markets by the throat and drive them even further into the ground. Yet they can’t, indicating that the bears are near exhaustion and that the big selloff earlier this month has already priced in weaker expectations for 2016.

This leaves many markets, particularly stocks, in transition with dominance starting to pass over to the bulls who remain tentative at this stage. Because of this, the bumpy bottoming process we have been seeing may continue for a while, creating significant intraday swings that provide opportunities for shorter-term trading strategies.

There have been a ton of earnings reports out overnight with strong reports out of Facebook (O:FB), corporate tech companies like Qualcomm (O:QCOM) and Citrix (O:CTXS), homebuilders like Pulte (N:PHM) and automakers Ford (N:F) and Harley-Davidson (N:HOG). Even Caterpillar (N:CAT) wasn’t too bad considering the big cutbacks in spending on mining and energy equipment. One theme running through this is strong spending on big ticket items like cars and houses. Because of this, at the broader level, today’s US durable goods report could get attention from traders looking for confirmation.

In Canada Potash (TO:POT) takes centre stage and could get crushed today following a triple whammy of an earnings miss, very weak guidance and a big dividend cut. Ouch! Methanex's (TO:MX) earnings were soft as well. Between these reports, crude oil rising, gold pulling back a bit, we could see a day of mixed trading on the TSX.

In currrency trading this morning, USD is down slightly while NZD has taken a large hit on their dovish central bank statements. On the oil rally CAD is holding steady as the loonie digests recent gains while RUB is staging a catch-up rally. GBP is strengthening with UK GDP coming in as expected. JPY is down slightly with the street still at odds over what may come out of tonight’s Bank of Japan meeting.

Stocks Bend But Don’t Break; Oil Recovery Continues
 

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Stocks Bend But Don’t Break; Oil Recovery Continues

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