Market Expectations 3/31-4/4

Weekly Economic Calendar

Monday: Ignore everything but Yellen speaking. If Yellen mentions interest rates shes going to say somewhere Mid-2015 they would expect to raise fed funds and interest rate. She will be speaking in Chicago at a community reinvestment conference so it might not even be brought up. But the market will be listening. Tuesday: Motor Vehicle Sales. Minor market mover unless there is drastic news it is mostly ignorable especially since most people arent paying attention to Car companies ex. Tesla.

ISM Report. The bond market will rally (fall) when the ISM manufacturing index is weaker (stronger) than
expected. Equity markets prefer lower interest rates and could rally with the bond market. However, a healthy manufacturing sector, indicated by rising ISM index levels, bodes well for corporate earnings and is bullish for the stock market.

ISM will move the market this week. Investors are already on edge and are looking for an excuse to sell. They didnt get one 3/28/14 as consumer spending met expectations we saw a rally but slowly fell off PMI and Construction spending will be relatively minor excluding anything drastic because ISM will be overshadowing it. We could see a drastic fall off in construction spending due to the weather according to experts but it could be a piece of a bigger problem if that occurs. If spending increases expect a minor positive effect to the market if it decreases dont expect any changes because it will all be blamed on the weather.

Wednesday: Relatively uneventful day. ADP employment report is usually off, by a lot, to the true survey done by the government; it is largely useless. Factory Orders will be strongly tied to ISM which will be

released the day before so anything missing or exceeding expectations will likely have a decent impact on investors. Expect nothing to really come of it though.

Thursday: International Trade and Jobless Claims. International Trade aka the Trade Deficit. Market reaction to this report is complex. Typically,
the smaller the trade deficit, the more bullish for the dollar. Also, stronger exports are bullish for corporate earnings and the stock market.

Jobless Claims: Consistently trending down the past few weeks. 3 week moving average has been on a downtrend since mid- January. Past two weeks when unemployment has beat expectations, market has opened higher and then fell off and eventually went negative on the day. Wouldnt expect Jobless claims to really move the market this week especially with Non Farm Payroll coming out the next day.

Except Thursday to trade sideways if not negative leading up to NFP.

Friday : Employment Situation. A Non Farm Payroll that beats expectations usually has the market open up high then fall off while a weaker NFP will result in the stock market turning green for the day.

The following graph illustrates better than what could be said:

As Billy has noted, the S&P 500 has been channeling for over two weeks now. The longer the SPY channels the more violent the breakout will be either positive or negative. If we were to look at the weekly SPY chart, the SPY has pulled back to its 20 EMA 3 times in 2013. Right now the SPX is sitting roughly 4.4 points above this support level about a 2.3% pullback is needed. So I do expect a pullback, when is the only question. Bad retail sales along with a lot of companies missing Q4 expectations led the most recent pullback and correction. Its hard to pinpoint this correction because it might be this week it might not ever come. If there is going to be any buying it would have to be an ETF and it would have to be screaming buy me. After consumer spending met expectations and stocks rallied Friday was another week day on buying in the SPY. Which is not good for the bulls cause. Yet there are a few ETFs that that warrant our attention more specifically, XLE, which broke out a point of resistance stretching back to 2013. Another potential catalyst is obviously Ukraine and Russia blowing themselves up. But an argument I heard about was for the past 18-24 months the Market has completely ignored any and all bad news and continued to churn out new highs so why would that effect us? Its definitely something to think about at least.

The SPY just put in an inverted hammer so Monday I do not expect it to be a good day based off technical analysis alone but that could change over the weekend with some news event. Billy if you have to day trade I would recommend starting at the open and getting out at the latest by 1130. Notice the past week the SPY has opened higher than it has closed but closed lower than the previous day. Have to be nimble.