Major indexes start the second quarter trading lower today as investors look toward earnings reports and economic data to support valuations

April 3, 2017
By Vlad Karpel

Major U.S stock indexes are slipping downward as investors will be waiting for earnings reports for verification on corporate growth and integrity. Although last week ended the first quarter with significant gains, analysts remain skeptical about valuations being somewhat overstretched. Although a strong earnings season is expected- particularly for tech, healthcare and financials- we can assume this level of softness until more data arrives.

An underwhelming report from the U.S. Markit manufacturing purchasing manager’s index had also made an impact on investor sentiment today. The index is at 53.3 for March, which is a drop from 54.2 for February.  This data contributes to a pullback in investor optimism for the market rallies over previous months, largely stemming from anticipated tax reforms and a pro-growth, pro-business agenda from the Trump administration. Following the health-care bill failure, many are questioning the feasibility of pushing these agendas without obstruction or political upheaval.

The Dow is currently down 0.54%, or 112 points, at 20,580.53. The Nasdaq-100 is down 0.63% at 5,887.40 and the S&P 500 is currently trading at 2,351.19 which is down 0.63% from the open.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows slight downward movement with positive reversal in the next two trading sessions. Today’s negative vector figure of -0.16% reverses to +0.43% in the four trading sessions. Today’s support and resistance is 2,354.98 (± 3.45) and 2,364.80 (± 3.47), respectively. The predicted close today is 2,362.66.   



Crude oil futures are also starting the second quarter lower today, following a resumption of Libyan production over the weekend. An armed militia group had taken over facilities due to a wage dispute, effectively halting one third of the country’s output temporarily. Saudi Arabia and Kuwait recently released statements indicating they will extend production cuts later into this year. OPEC has also shown, through its own data, a 94% compliance rate for the accord struck last November. Bullish sentiments may be returning to this market, as some analysts do not consider U.S production hikes to be big enough to offset the global market in the long term.  West Texas Intermediate for May delivery is currently priced at $50.19 per barrel, down 0.67% from the open.

Looking at USO, a crude oil tracker, our 10-day prediction model shows upward movement building incrementally. The fund is currently trading at $10.545, which is down 0.89% from the open. Today’s prediction sees support at $10.64 (± 0.07) and resistance at $10.80 (± 0.07). The predicted close for today is $10.79. Vector figures show +1.27% for today, which ramp up to above +5.50% within four trading sessions. All vector figures are based on today’s market conditions.  



The price for April gold is up 0.26% at $1,254.70 a troy ounce. The non-fiat asset is continuing into a possible second straight day of gains, as risk-averse investors turn to the yellow metal. A deadly explosion in St. Petersburg on Monday had also contributed to gains in gold, as the asset is seen as a safe-haven during times of upset and uncertainty. Many analysts see a downturn for gold in the future, however, as stock rallies and economic optimism will strengthen interest rates and the U.S dollar.

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows today’s positive movement followed by negative reversals. The gold proxy is currently trading at $119.22, up 0.42% from the open. Today’s predicted low is $118.27 (± 0.27) and the predicted high is $120.10 (± 0.28). The predicted close today is $118.36. Relative to today’s conditions, vectors shift from +0.12% today to -0.07% within three trading sessions.  



The yield on the 10-year Treasury note sunk to its lowest point in a month, dropping 4.8 basis points to 2.341%. Currently, investors are looking for economic data to support bullish market sentiments of previous months. Underwhelming economic data today had contributed to yield movement. Yields move inversely to bond prices.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see negative signals building incrementally in our 10-day prediction window. Relative to today’s conditions, we see vector figures moving from -0.12% today to pass -0.50% in three trading sessions.  The ETF is currently priced at $121.435- up 0.60% from the open. The predicted close today is $120.34 with a low and high of $119.66 (± 0.24) and $120.71 (± 0.24), respectively.  



The CBOE Volatility Index (VIX) is currently up 4.77% from the open at 12.96. Relative to today’s conditions, the 10-day prediction window shows strong signals for positive movement overall. The predicted close today is 12.58 with a positive vector of +4.11%. Today’s predicted lows and highs are 12.18 (± 0.23) and 12.87 (± 0.24), respectively.


Other News

Tesla (TSLA) saw its shares climb high, following better-than-expected figures for first-quarter deliveries at 25,000 vehicles. The stock is currently trading at $291.96 which is up 5.53%, or $15.39,  from the open.

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