19 October 2016 – Bullish start to earnings season

The indices continued to advance at the beginning of the earnings season. Stocks continued to advance at the beginning of the earnings season. Investors were cautious ahead of the European Central Bank meeting on Thursday.

The US dollar index was sideways in a larger uptrend. Bond was sideways and is still in a downtrend. Commodities continues its uptrend.

WTI oil futures gained on bullish inventory data and made new 15-month high above $51 per barrel which helped the broader market and stocks advanced as a result.

On the economic front, Housing Starts for Sept fell -9% which was well below estimates for a 2.9% rise. The Fed Beige Book showed that parts of the US economy grew at a moderate pace and was largely positive. Hard data shows that the strong dollar is weighing on exports. There is an uptick in retail spending, improved demand for services, growing real-estate market and stability in the oil and natural sector.

On the political front, there is the final presidential debate between the 2 candidates.

Dow Transportation surged on market open and traded strongly upward till the end of the day. It closed with a bullish marubozu candle above its 21 EMA. Momentum is upward. Volumetric buying pressure is at 20.9%. The index is in a daily and monthly Squeeze.

Dow Industrial was indecisive in the first half hour after market open before surging upward till midday. It range traded before pulling back at the end of the day to close with a small bullish candle on its 21 EMA. Momentum remains downward. Short term volumetric buying pressure is at 60.9%. The index is in a daily and monthly Squeeze.

Russell 2000 pulled back in the first half hour after market open before surging upward. It traded upward till the end of the day to close with a bullish spinning top doji candle on its 8 EMA. Volumetric buying pressure is at 5.9%.

Nasdaq 100 swung up and down throughout the day and closed with a small doji candle on its 21 EMA. Momentum is neutral. Volumetric buying pressure is at 70.8%. The index is in a daily and monthly Squeeze.

S&P 500 probed for the bottom in the first half hour before surging upward for the rest of the day. It closed with a bullish candle below its 21 EMA and 50 SMA. Momentum is downward. Volumetric buying pressure is at 43.7%. The index is in a daily and monthly Squeeze.

Metals and Commodities
WTI Crude oil futures surged on market open and is trading at $51.67 per barrel. It is in a sharp uptrend.

Gold futures gained for the day and is trading at $1270.0 per ounce. It has broken above its 200 SMA which was providing support. Momentum is downward.

Silver futures is trading at $17.690 per ounce just above its 200 SMA in sideways trading.

Agriculture (DBA) ETF closed at 20.26 in sideways trading.

Commodities (DBC) ETF traded upward and closed at 15.41. It continued its sharp uptrend.

Bonds
Bond futures (ZB) traded sideways at 164’13. It is below its 200 SMA.

High Yield bond ETF (HYG) gained for the day and closed at 87.34 above its moving averages. Momentum remains upward. It is in a Squeeze.

Bonds ETF (TLT) closed with a bullish marubozu candle at 132.97 below its 200 SMA. Momentum remains downward.

Currencies
The dollar index traded sideways and is trading at 97.860 above its moving averages.

EUR/USD traded down and closed with a bearish spinning top doji candle in a continuing downtrend. It is trading at 1.09734.

USD/JPY traded down for the day and is trading at 103.382. Momentum remains upward.

Relative Strength – Sectors
On a monthly lookback, the relative strength order of the ETFs that are outperforming the S&P 500 are XLE, XLF, XLB, XLU, XLK and XLI respectively.

On a 3-month lookback, the relative strength order of the ETFs that are outperforming the S&P 500 are XLE, XLK, XLF, XLB, XLU, XLI and XLY respectively.

Market Internals
Vix closed at 14.41. Vix futures is at 16.10 and is in a Squeeze. Skew is at 122.56. Market sentiment is bullish. Market breadth is sloping upward. Volumetric accumulation/distribution is sloping upward.

The Week Ahead
Market internals is showing positive gain in market breadth and volumetric accumulation for the short term. This is a positive sign at the start of the earnings season. The prognosis is for more volatility with a short term bullish bias.

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