Major indices spring back from slides, but held back by financials

After equity markets saw a sell off in previous trading, major indices are regaining from slides as investors focus on earnings reports from major financial names. Both Bank of America Corp. (BAC) and Goldman Sachs Group Inc. (GS) saw shares fall today after posting data which fell below expectations. Overall, earnings season has been good, but investors have other political and economic stories in mind this week. It is common thought that financials reporting is the only factor keeping the DJIA from exceeding the 26,000 mark today.

Without a bipartisan decision on immigration policy, we may be looking at a partial government shutdown over the weekend. Common ground will need to be met in Washington by 12:01 EST this Saturday, as this is a component of a spending agreement. Focus is also being shifted to a series of events involving key Fed officials today. Chicago, Dallas and Cleveland Fed Presidents are all scheduled for speaking events and discussions this afternoon.

On the economic front- we’re seeing the release of the Federal Reserve’s Beige Book this afternoon. The Beige Book is an in-depth study on current economic conditions and activity. A 0.9% rise in industrial production- a fourth consecutive monthly gain- was reported by the Federal Reserve today as well.

At the time of publication, the DJIA is up 0.73%, or 188.42 points, at 25,980. The S&P 500 is trading at 2,792- up 0.55% from the open. The Nasdaq-100 is up 0.52% at 7,261.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows  consistent positive signals. Today’s positive vector figure of +0.28% moves to +1.15% within three trading sessions.  Today’s predicted support and resistance is 2,780.09 (± 3.43) and 2,807.44 (± 3.46), respectively. The predicted close today is 2,793.96. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.  

Highlight of a Recent Winning Trade

On January 2, our ActiveInvestor service- which is included in Tradespoon’s Tools and Premium membership plans- generated a trade recommendation for People’s United Financial Inc. (PBCT). Our ActiveInvestor service is designed for swing trading.

Trade Breakdown

PBCT moved within the Entry 1 ($18.58, ± 0.09) price range on January 3, and saw mostly sideways movement before seeing a boost in price after 8 days. The stock hit our Target Price of $19.51 in the first hour of trading on January 12. The Stop Loss was set at $17.65.

Buy, Buy, Buy: Stock Signals for Thursday

Our featured stock for Thursday is Texas Instruments Inc. (TXN). TXN is showing solid bullish signals in our Stock Forecast Toolbox’s 10-day forecast. This stock is assigned a Model Grade of (B)– indicating it ranks in the top 25th percentile for accuracy for predicted support and resistance, relative to our entire data universe. Our 10-day prediction model shows vector figures rising above +2.10% within the next three trading sessions. Our benchmark for vector figures is +1.00%.

*Please note: Our featured stock is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services.  If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader or ActiveInvestor recommendations.  If you are interested in receiving Vlad’s personal picks, please click here.

The stock is trading at $116.37 at the time of publication, up 3.06% from the open with a +0.90% vector figure.

Thursday’s prediction shows an open price of $114.45, a low of $113.95 and a high of $115.93.

The predicted close for Thursday is $115.63. Vector figures show +1.69% for tomorrow, and rise incrementally throughout the forecast.  This is a good signal for trading opportunities, because we use vectors as a primary factor in determining price movements for stocks and ETF.

Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Note: The Vector column calculates the change of the Forecasted Average Price for next trading session relatively to average of actual prices for last trading session. The column shows expected average price movement “Up or Down”, in percent. Trend traders should trade along predicted direction of the Vector. The higher the value of the Vector the higher its momentum.

Oil

Crude prices will likely remain in range today, as investors both digest recent data reports and anticipate more incoming this week. Particularly, output forecasts from both the EIA and the American Petroleum Institute will be in focus. OPEC efforts to curb global production, an agreement which also includes non-member countries such as Russia, has been the main driver of higher per-barrel prices. Geopolitical uncertainties and realities- such as the ongoing unrest in Iran- have also been a recent contributing factor. Both weekly reporting and monthly forecasts for U.S. domestic and shale production will be in play today and tomorrow. The EIA is forecasting total February U.S. production to hit 10 million barrels a day, and a monthly increase of 111,000 barrels a day from shale ventures.

In typical fashion, higher crude prices are incentivizing U.S. domestic producers- who are not involved in the OPEC accord- to take short-term advantage and ramp up production temporarily. Analysts are divided over the market’s direction as of now. Some cite current and future supply disruptions- such as promised pipeline attacks in Nigeria from the Niger Delta Avengers and recent attacks in Libya- to further boost prices. Others are indicating a level of resistance due to the fact that global consumers may limit consumption due to high prices and demand will pare off.

West Texas Intermediate for February delivery (CLG8) is priced at $63.76 per barrel at the time of publication, up 0.33% from the open.  

Looking at USO, a crude oil tracker, our 10-day prediction model shows solid positive signals. The fund is trading at $12.80 at the time of publication, up 0.31% from the open. Today’s prediction sees support at $12.76 (± 0.03) and resistance at $12.99 (± 0.03). The predicted close for today is $12.90. Vector figures show +0.59% today, pushing to +1.82% in three trading sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.   

Gold

The price for February gold (GCG8) is up 0.12% at $1,336.10 a troy ounce at the time of publication. The U.S. dollar is seeing a recovery period from recent turbulence, most recently seeing a floor materialize after officials from both the European Central Bank and Bank of Japan voiced worries around the strength of the euro and yen against the dollar. Investors will be looking to an ECB meeting on January 25, where most expect to see indications of a hawkish shift in monetary policy- which can directly impact the greenback. More buckling in bipartisan cooperation on policies like immigration is creating a preview of future troubles in manifesting market-friendly policy like infrastructure spending.

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows mixed signals which indicate sideways movement. The gold proxy is trading at $126.68, down 0.39% at the time of publication. Today’s predicted low is $126.40 (± 0.23) and the predicted high is $127.58 (± 0.23). The predicted close today is $127.22. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.   

Treasuries

We’re seeing a return to flattening activity in the yield curve as recent industrial production data reported above expectations. Short-dated yields are rising due to increased expectations of more rapid pace of interest rate hikes from the Fed, as near-term economic data may warrant.  Market participants will continue to monitor the most important and contested figure in this equation- inflation. The overall beat from the Fed in recent month involves temporarily overlooking lacking inflation rates and instead guide policy by current economic data- suggesting inflation will eventually catch up.  Although monthly economic data may prove strong and boost short-term sentiments, a rapidly flattening yield curve may be a red flag to some. There are worries that monetary policy may tighten too fast, jumping the gun and overshooting long-term economic realities and future conditions. The yield on the 10-year Treasury note is up 0.83% at 2.56% at the time of publication.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see mixed signals with overall positive movement in our 10-day prediction window. Today’s vector of +0.58% moves to -0.02% in three trading sessions before reversing again to positive territory.  The ETF is priced at $125.19 at the time of publication, up 0.12%. The predicted close today is $125.92 with a low and high of $125.04 (± 0.40) and $126.93 (± 0.40), respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Cryptocurrencies

A broad selloff in cryptocurrencies this week continues, due primarily to a global push by some countries for a regulatory crackdown. South Korea is leading this effort, although a petition against the crackdown has been lobbied to the government, meeting its quota of 200,000 signatures to require a response. The No. 2 and No. 3 cryptocurrencies, Ethereum and Ripple, are also diving. This should not be considered a bubble burst as some suggest, and many have anticipated a drop to this level due to regulatory and government backlash.

The spot price for a single bitcoin (BTCUSD) is down 4.28% at $10,230.42 at the time of publication. CME’s January futures contract for bitcoin (BTCF8) is down 9.27% at $10,160 at the time of publication.

Ether coins on the Ethereum blockchain are mirroring bitcoin slides today. The spot price for an Ether coin is down 17.39% from 24 hours at $889.69 at the time of publication.

The spot price of a single Ripple coin is down 20.96% form 24 hours at $1.03 at the time of publication.

Using Grayscale’s Bitcoin Investment Trust (GBTC) as a Bitcoin tracker in our Stock Forecast Toolbox, we see mixed signals and volatility in our 10-day prediction window. Today’s vector of +1.85% moves to -6.37% within three trading sessions. The proxy trust is priced at $1,577.05 at the time of publication, down 9.16% or $158.95. The predicted close today is $1,824.64 with a low and high of $1,666.08 (± 75.93) and $2,003.09 (± 91.29), respectively. It is likely real price movement will deviate from these predictions, considering high uncertainty and sensitivity to news developments. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Volatility

The CBOE Volatility Index (VIX) is down 2.57% from the open at 11.36 at the time of publication, and our 10-day prediction window shows strong negative signals.  The predicted close today is 11.27 with a negative vector of +2.18%.  Today’s predicted lows and highs are 10.70 (± 0.21) and 12.48 (± 0.25), respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.