Quiet Week in February

The ended almost unchanged for the S&P500 which slipped about 0.3% on relatively light volume. Stock market volatility also didn’t change much—the VIX index ended the week just a bit lower than where it started.

So there was a lot of watching and waiting.

Technicals point to the same conclusion that was reached last week—that of a market hugging highs, highs that are still extremely overstretched, by historical standards. Both daily and weekly charts show prices remaining near their respective upper Bollinger bands. At the same time, many measures of internals and breadth are still not confirming the elevated prices. The McClellan Oscillator actually dropped last week in another sign that as index prices head one way (up) many smaller, individual firm prices are headed the other way (down).

The US economic story remains unchanged—over the last two months, the pace of deterioration has continued, as judged by the percentage of economic reports that have missed expectations. This figure is close to 90%. Not a good sign of things to come.

Last week, only PMI services and new home sales beat expectations. The other dozen or so reports all missed, and some very badly. The Chicago Fed National Activity Index missed. Existing home sales missed (badly). The Dallas Fed survey missed. Consumer confidence missed. The Richmond Fed index missed. Durable goods ex-transportation missed. Initial jobless claims missed. The Kansas City Fed index missed. Chicago PMI missed (very badly). And pending home sales missed.

So while the tensions in Greece and Ukraine have simmered down….for now, the US stock markets did not take off nor did US Treasury yields soar. If both of these happened, then that would be a big sign from markets that all is well in the world and money can flow back from safe havens (US Treasuries) to risky assets (US stocks).

That didn’t happen.

Let’s see what this week brings, especially with the big jobs report on Friday.

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