Recap: Week Ending March 7, 2014
News out of Russia continued to dominate markets this week. Equities opened Monday much lower on the threat of possible war in the Crimea peninsula of Ukraine. Russia still has not officially acknowledged that the troops in Crimea are from Russia, however, many have assumed that this is the case. Such news out of Eastern Europe sent shivers of fear across markets, forcing risk off plays much higher. Gold rallied hard on the thread of possible war, closing higher just over $20 Monday. A similar story played out in US bonds as the 30 yr rallied Sunday night on is open, however, fell somewhat throughout the day Monday. The other big winner was crude oil, which caught a huge bid as war would spark an increase in the demand for gasoline and intern oil. Monday crude closed up over $1.8. The situation in Europe was very liquid during the past week and on Tuesday tensions between the two countries eased and markets returned to upside. Following the easing of tensions, gold, bonds and oil all sold off as the need for a haven rapidly became unneeded. Tuesday’s gains in equities surpassed the losses incurred during Monday’s sell off. The S&P 500 was able to close on a new all time high, at 1878. Many traders SP futures believe that this rally is coming to an end, however, at the S&P500 is targeting the 1900 level. Following that level, many believe a sell off may be in the works. The Dow Jones Industrial Average was still able to close higher on the week despite Monday’s extreme downside. Despite closing higher, the Dow is roughly 120 points away from making all time highs which were previously made on the last trading day of 2013. Like the other major averages, the NASDAQ 100 was able to close higher on the week. But, like last week, the NASDAQ was the weakest out of all 3 indexes. In previous weeks, the NASDAQ has led the way higher. A sign of weakness in the NASDAQ may be the start of a potential top. If the index is seen weaker in the upcoming week, investors should start to consider downside risk.
The Toronto Stock Exchange did not fair as badly as its US counterparts did to the news out of Europe on the threat of war. With this being said, the index was not able to produce such gains which were seen in the US as the tensions eased between Russia and Ukraine. The reason is that the TSX is highly comprised of gold and energy stocks, which saw a strong bid on Monday following the rise in both gold and energies. The TSX is still performing strongly for the 2014 year and is sitting just under multiyear highs. With this being said, it must be noted that on a daily chart, the MACD is starting to form a bearish cross. The last time this occurred was in the end of January and the index fell almost 500 points before rebounding to a strong rally.
Friday was the release of both the Canadian and US unemployment pictures for the month of February. In Canada, the unemployment rate did not move, coming in at a consensus of 7%. The US missed their unemployment consensus and previous reading of 6.6% coming in at 6.7%. Many are attributing the cold weather to weaker unemployment pictures as many do not want to venture out in the weather and search for work.
The situation out of Eastern Europe appears to be nowhere near ends. It is very important to follow the news on as anything can happen on a moments notice.