Market Brief – Wednesday 3/13/19

U.S. stocks headed higher in early without any major economic news driving buyers. The S&P 500 is retesting its overhead resistance at 2,816, which has been a level of resistance going back more than a year. Bulls want this to break, while Bears want it to hold.

Treasury yields continue to oppose this move higher in stocks as yields rose slightly in early trading, but the 10-year Treasury yield remains below its former support level at 2.62%.

The EIA reported crude inventories as Crude -3.862M, Cushing -0.672M, Gasoline -4.624M, and Distillates 0.383M. Crude oil Bulls were celebrating this draw, even though draws during this time of the year should be higher. Crude oil is sensitive to monetary decelerations, so expect builds to resume despite a rush to cut production by global oil producers.

Core Durable Goods rose +0.4% MoM versus expectations of a -0.4% print. February’s data was boosted by an increase in business investment.

Residential spending fell for the sixth straight month as government spending attempts to offset the decline in spending by the public sector.

Today’s $16 billion 30-year Treasury auction saw 57.8% going to foreign bidders, 14.1% going to domestic bidders and 28.1% going to securities dealers. Yields fell slightly following the auction.

The S&P 500 briefly broke over its long-trending resistance level of 2,816, only to close right in the middle of resistance. Friday is one of the largest options expirations days in the calendar. When speculators are bullish and use options contracts, they can be forced to buy the underlying security if the markets don’t go as high as they need them to. In this case, the equity market has not performed as well as these speculators thought, so they are becoming forced buyers. Unfortunately for them, the equity market isn’t responding as well as the speculators hoped.

Treasury yields closed slightly higher as the bond market continues to suggest the equity market is moving in the wrong direction. Those who are buying stocks are shorting Treasuries to generate cash to buy stocks. A dangerous move, especially when the Treasury bond market is on the cusp of breaking down and triggering the largest short squeeze in the history of the bond market.

Oil and gas producing stocks reclaimed their 50-day moving average but are caught just under their resistance zone. Today’s crude oil inventory appears to be bullish, but crude oil draws should be much higher this time of the year. A weakening global economy is not bullish for oil.

Physical gold closed just over its resistance level but is not providing any indication that this will be the breakout move higher. It still seems more likely that there will be a pullback when analyzing past price trends. Both the gold and the silver miners followed suit.

Agricultural commodities moved higher on low volume. A major storm is set to hit the growing region of the country. The ‘bomb cyclone,’ as the news is reporting, is expected to bring triple-digit winds, massive amounts of rain and flooding.