The swing thing
11/19/18

●Crude oil collapse weighed on stocks

●Brexit woes shook up global equity markets, British pound

●Housing market data due during Thanksgiving-shortened week


 

Well, it’s probably been a gut-check for investors, but the stock market’s gyrations have given swing traders plenty of action.

Amid a whirlwind of catalysts—Brexit drama, plunging oil prices, and continued tech weakness—US stocks spent the first part of last week in retreat before standing their ground on Thursday and Friday.

After a tech-driven Monday selloff spearheaded by a slumping Apple (AAPL), Tuesday’s intraday rebound got kicked in the shins by an epic crude oil dump: January WTI crude oil futures (CLF9) fell 7% intraday (after losing more than 4% on Monday), understandably spooking stocks, which turned lower and closed down on the day.

S&P 500 (SPX), 9/21/18–11/16/18. S&P 500 (SPX) price chart. The hits keep on comin’

Source: OptionsHouse


But after dropping to an 11-day low on Thursday morning—amid global stock weakness on news of the latest wrench tossed into the Brexit works—the S&P 500 (SPX) charged higher to close in the green, and followed through with a gain on Friday, which included some optimistic chatter regarding the US-China trade war.1 In the end, although it turned out to be a down week, the SPX managed to keep its head above the waterline of its late-October lows.

Once again, tech was one of the market’s weak links, while small caps held up best under the week’s pressure (even though the Russell 2000 slipped back into the red for the year). Large caps held the middle ground, although the Dow Jones Industrial Average (DJIA) was skewed lower because of the hits taken by AAPL and Boeing (BA). Here’s how the major US indexes fared:

US stock index performance table for week ending 11/16/18

Source: OptionsHouse (data)


Sector action: And the crowd chants, “De-fense, de-fense…” During an overall red week, things got a little defensive: real estate (+0.8%), materials (+0.4%), and utilities (-0.3%) were the top-performing S&P 500 sectors, while consumer discretionary (-3.8%), information technology (-2.5%), and energy (-2.1%) were the weakest.

Highlight reel: Apple (AAPL) had one of its worst weeks in a while, falling 5% on Monday, 1% on Tuesday, and 3% on Wednesday before finding its footing on Thursday. Abiomed (ABMD), which has been choppier than a Veg-O-Matic since June, dropped nearly 17% on Monday, and kept sliding until Thursday. Utility provider PG&E (PCG), which dropped 63% from November 8-15 as the California wildfires continued to wreak havoc, rebounded 38% on Friday.

Futures watch: After its Tuesday tank job, January WTI crude oil futures (CLF9) put together tentative gains on Wednesday, Thursday, and Friday, although in each case the market pulled back significantly from intraday highs. Crude ended the week around $57/barrel.

Thursday’s Brexit woes dinged December British pound futures (6EZ8), which dropped 2% to test (again) support around 1.2750.

On Monday December Dollar Index futures (DXZ18) topped their August highs to reach their highest level (97.53) since June 2017 before pulling back the remainder of the week.

The week ahead

The holidays are officially here. The US stock market will be closed Thursday for Thanksgiving, and will close early (1 p.m. ET) on Friday. Some financial futures contracts (including stock indexes) will trade limited hours on Thanksgiving, and will also close early on Friday. The latest wave of housing numbers highlights the truncated week’s economic calendar:     

Monday: Housing Market Index, E-Commerce Retail Sales

Tuesday: Housing Starts

Wednesday: Durable Goods Orders, Consumer Sentiment, Existing Home Sales, Leading Indicators

Thursday: Thanksgiving

Friday: Germany GDP; US stock index futures markets close early

There are some notable earnings (especially retail) on tap despite the shortened week:

Monday: JD.com (JD), Agilent (A), Brooks Automation (BRKS), Intuit (INTU), L Brands (LB), Urban Outfitters (URBN)

Tuesday: Analog Devices (ADI), Best Buy (BBY), Campbell Soup (CPB), Copart (CPRT), Dollar Tree (DLTR), Hormel Foods (HRL), Kohl's (KSS), Lowe's (LOW), Medtronic (MDT), Ross Stores (ROST), Target (TGT), TJX (TJX)

Wednesday: Baozun (BZUN), Deere (DE), SINA (SINA), Weibo (WB),

Thursday: Thanksgiving

Friday: Patterson Companies (PDCO)

Futures contracts expiring this week include December WTI Crude Oil (CLZ8) and November Mexican peso (6MX8) today, and December S&P 500 VIX (VXZ8) on Wednesday.                

Go to the E*TRADE market calendar (logon required) for an up-to-date earnings schedule, along with a complete list of splits, dividends, IPOs, economic reports, and other market events. The Active Trader Commentary also lists earnings announcements and economic report times every day.

Follow the…oil? If you’re wondering whether crude oil really exerts that much influence on the stock market, take a look at the following five-minute chart of the December E-Mini S&P futures (white line) and January WTI crude futures (CLF9) from Friday morning:

Dec. E-Mini S&P 500 (ESZ8) and Jan. crude oil (CLF9), 5-minute, 11-16-18. Following the oil flow

Source: OptionsHouse


During this period, at least, the equity market (white line) followed the crude market’s (blue line) swings pretty faithfully, in direction if not magnitude.

 

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1 Trump Says He’s Optimistic About Trade Deal After Receiving China Response. 11/16/18.