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Nov 16, 2016

U.S. Stock Market Future Indications - November 16, 2016: The Stock Rally is About to Catch a Chill, if This Indicator Holds

www.marketwatch.com


marketwatch.com
 
Barbara Kollmeyer
 
A week ago, the market shook off an election rally, and it hasn’t looked back since.
That could change today, if early stock futures are any indication. Still, Tuesday’s close was solid, with a record finish for the Dow industrials DJIA, +0.29%  and a decent performance out of the S&P 500 SPX, +0.75%

And here’s the thing about that session — even the battered techs got a chance to join in, with a 1.1% gain for the Nasdaq Composite COMP, +1.10% Our call of the day digs into whether that index can keep the comeback going.
As for prospects for the S&P 500, the chatter today says it’s worth taking a look at the Goldman Sachs Financial Conditions Index for a steer. The index measures how tight or loose monetary policy is, as in real monetary policy — credit spreads, long-term rates, currency appreciation or not.
Recent moves are shown in the chart below, which has been doing the rounds on Twitter (h/t to Bloomberg’s Joe Weisenthal).
It shows the Goldman index is pointing south as the S&P 500 heads in the other direction. “Moving down means that real people and business are facing tighter conditions — more expensive rates to borrow money, says Helen Thomas, of the Blonde Money blog.
Something’s gotta give? “So you’d think if it [the index] goes down, stocks markets would fall, because it’s harder to get credit and more expensive to borrow,” Thomas says. And if this chart is indeed showing less money around to dip into, then stocks should start to sell off as has been the pattern in the past few years, she says.
Key market gauges
Dow YMZ6, -0.34%  , S&P ESZ6, -0.41%  and Nasdaq-100 futures COMP, +1.10%  are pointing to a moderate pullback. Asian markets ADOW, -0.02%  had a mostly up day, and the Nikkei NIK, +1.10%  surged 1%. Europe SXXP, -0.51%  is slipping.
Gold GCZ6, +0.11%  has shifted lower, while oil CLZ6, -0.94% has gotten spooked by an outlook from the International Energy Agency. U.S. supply data is coming later. The dollar DXY, +0.17% seems afraid of no one, trudging higher still.
Yields on the 10-year T-bond TMUBMUSD10Y, +2.32%  are sticking to year-highs of around 2.29%.
Opinion: There are three possible outcomes for bonds, and two are bad
The call
Trashed techs are about to turn into an opportunity for investors, says Sean D. Emory. On Tuesday, the Nasdaq broke a string of losses linked to worries for the sector over a Trump presidency.
Emory, chief investment officer at Avory & Co., is watching the chart below — the Technology Select Sector SPDR Fund XLK, +1.41% XLK, +1.41% . Going by this ETF’s performance, the sector looks ready to test some key levels higher, he says on his Market Meter blog. And if it does, he’s standing by to pick up some big, battered names.
Techs ready to finally break the losses>
But Emory cautioned that a strong dollar DXY, +0.17%  could knock shares in techs back again, as those companies’s revenue is exposed to moves in the greenback. And it’s definitely shaping up for a day of greenback strength. Blogger Macro Man , among others, says the dollar index could shoot 15% to 20% higher.
The stat
The buzz
Target TGT, -1.01%  and Lowe’s LOW, -1.37%  is down after results, and Cisco CSCO, +1.05%  is coming after the close.
Ford F, -0.17%   CEO Mark Fields warns Trump’s plans for high tariffs will hurt the industry and economy.
Talk of Snapchat IPO fuels hopes that 2017 will be a big year for unicorn tech companies going public.
Small-cap stocks have been on a tear since the election on the view Trump will be good for them.
Also check out this warning from the Bank for International Settlements of a “dollar shortage.”
The quote
Everett Collection / Everett Collection
Sci-fi’s ‘Love Story’
“It was so intense. It was Han and Leia during the week, and Carrie and Harrison during the weekend.” — Carrie Fisher makes all our dreams come true by dishing on a long-ago affair with her famous co-star
The economy
Producer prices are due at 8:30 a.m. Eastern Time, followed later in the morning by readings on industrial production and a home builders’ index.
Random reads
Amid talk of Trump transition team chaos, future POTUS says only he ‘knows who the finalists are’
Trump and the press, meanwhile, are off to a bumpy start
Life as a cyborg, by MarketWatch reporter Jennifer Booton
Google’s new PhotoScan app might be the best thing ever:
Study finds pigs can be optimists or pessimists
Sorry, Duke. My Jayhawks went ka-boom last night:
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