There can be no denying that intraday volatility has been "a thing" during the vast majority of 2015's trading sessions. And while all too often there is nary a catalyst to be found, this was most certainly not the case on Wednesday as traders dealt with a European tank-job, yields rising over 2% on the 10-year, a GDP report that was eye-opening (and not in a good way) and the usual hysterics surrounding the release of the FOMC statement.

Thankfully, investors in the U.S. don't seem to get too worked up about the goings on in Europe these days. So, there probably isn't much reason to spend a lot of time fretting about the trouncing seen in the German DAX and France's CAC40. And the move in the 10-year could be something to take note of - especially if the rise in yield becomes a trend. But in reality, the stories of the day that require our attention included the ginormous miss in GDP and the Fed Statement.

We Knew it Would Be Bad, But...

To be sure, everybody on the planet knew that the rate of growth for U.S. GDP in the first quarter was going to be weak. There was the weather (again), the dollar, the West Coast port strike, and the carnage occurring in the shale industry. And after putting up a relatively crummy 2.2% rate in the last quarter of 2014, analysts were looking for Q1's GDP to come in around 1.0%.

So, when the report hit the wires that the economy had grown at a measly +0.2% during the January through March period, one couldn't be blamed for raising an eyebrow. Almost instantly stock futures pulled back and it looked like things might get ugly in a hurry. After all, the annualized rate of 0.2% was the lowest level seen in quite some time and WELL below the estimates.

But before the worry about the economy could start to really roll, the chatter that the report was "so bad that it's actually good" began. In short, traders couldn't decide whether to fret about the economy being much worse than expected or to celebrate the idea that the weak data meant the Fed surely wasn't going to start raising rates any time soon.

Speaking of the Fed

So, with the DJIA down about 165 points during the lunch break in New York, human traders began to realize that the Fed's ZIRP (zero interest rate policy) and the free money/carry trades associated with said policy might be more important than a crummy economic data point - which everyone had already expected.

Then when the Fed released a statement that was a bit more dovish than had been anticipated, well, those algos seeing the glass as half full went at it. And after the obligatory swings back and forth in the moments after the statement's release, those red screens actually turned green for a while.

For a little over an hour, the market appeared to like the tone of the FOMC statement. Despite the fact that all references to time and/or the calendar had been removed, the comments about the tough economic conditions being transitory and the new verbiage on the timing of the inevitable rate liftoff seemed to improve the mood.

To the average Joe, the FOMC's discussion on timing may not hold much meaning. But for those who watch markets closely, each and every change is important. The statement read, "The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term."

In other words, Janet Yellen's bunch was trying to hammer home the idea that they will not start raising rates until their criteria to do so has been met. And to those worrying that the Fed might want to "talk tough" in order to restore some credibility as an inflation fighter, the new verbiage was clearly a positive.

But In the End...

Unfortunately though, the upbeat mood didn't last very long. And in the end, the worries about where the economy and earnings might be headed seemed to win out. Or maybe it was the fact that the smallcaps took it on the chin again (are we seeing the beginnings of a momentum meltdown redux?) that caused some concern into the close. But in any event, stocks finished lower and the S&P 500 once again failed to break out of the trading range that began nearly two months ago.

Perhaps the chart below tells the real story here. While there were some pretty big headlines during the session and prices did move up and down a fair amount, at the end of the day, nothing much really changed.

S&P 500 Index - Daily

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The problem however, is that the current market action breeds complacency. Although there has been a fair amount of bad news, stocks are still hanging around the top end of the trading range, which leads to the assumption that the S&P 500 will eventually break on through to the other side and happy days will be here again.

But since "riding the range" has been the theme to this market since the end of November, we probably shouldn't be too surprised if traders find something negative to latch onto here soon and another trip down toward the lows commences. It's just the way the game is being played these days.

P.S. I am on the road for the next week and plan to report as time and energy levels permit.

Turning To This Morning...

Although there hasn't been any obvious catalyst overnight, the mood of the market this morning appears to be a bit glum. Perhaps this is tied to the fact that the yield on the 10-year remains above 2%. Or maybe it is a hangover from the fear that a June rate liftoff is still technically on the table. But in any event, U.S. stock futures point to a weak open at the present time. However, as we have learned lately, the early indication of direction on Wall Street has often proved to be of little value.

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell...

Major Foreign Markets:
    Japan: -2.69%
    Hong Kong: -0.94%
    Shanghai: -0.77%
    London: +0.04%
    Germany: +0.33%
    France: -0.19%
    Italy: +0.21%
    Spain: -0.05%

Crude Oil Futures: +$0.63 to $59.21

Gold: -$7.20 at $1202.80

Dollar: higher against the yen and pound, lower vs. euro

10-Year Bond Yield: Currently trading at 2.046%

Stock Indices in U.S. (relative to fair value):
    S&P 500: -5.30
    Dow Jones Industrial Average: -33
    NASDAQ Composite: -21.05

Thought For The Day:

The greatest glory in living lies not in never falling, but in rising every time we fall. -Nelson Mandela

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of Fed/ECB Policy
      2. The State of the Earnings Season
      3. The State of the U.S. Economy
      4. The State of the U.S. Dollar

The State of the Trend

We believe it is important to analyze the market using multiple time-frames. We define short-term as 3 days to 3 weeks, intermediate-term as 3 weeks to 3 months, and long-term as 3 months or more. Below are our current ratings of the three primary trends:

Short-Term Trend: Moderately Positive
(Chart below is S&P 500 daily over past 1 month)

Intermediate-Term Trend: Positive
(Chart below is S&P 500 daily over past 6 months)

Long-Term Trend: Positive
(Chart below is S&P 500 daily over past 2 years)

Key Technical Areas:

Traders as well as computerized algorithms are generally keenly aware of the important technical levels on the charts from a short-term basis. Below are the levels we deem important to watch today:

• Key Near-Term Support Zone(s) for S&P 500: 2080
• Key Near-Term Resistance Zone(s): 2120

The State of the Tape

Momentum indicators are designed to tell us about the technical health of a trend - I.E. if there is any "oomph" behind the move. Below are a handful of our favorite indicators relating to the market's "mo"...

• Trend and Breadth Confirmation Indicator (Short-Term): Neutral
• Price Thrust Indicator: Positive
• Volume Thrust Indicator: Neutral
• Breadth Thrust Indicator: Neutral
• Bull/Bear Volume Relationship: Positive
• Technical Health of 100+ Industry Groups: Moderately Positive

The Early Warning Indicators

Markets travel in cycles. Thus we must constantly be on the lookout for changes in the direction of the trend. Looking at market sentiment and the overbought/sold conditions can provide "early warning signs" that a trend change may be near.

• S&P 500 Overbought/Oversold Conditions:
        - Short-Term: Moderately Overbought
        - Intermediate-Term: Neutral
• Market Sentiment: Our primary sentiment model is Neutral .

The State of the Market Environment

One of the keys to long-term success in the stock market is stay in tune with the market's "big picture" environment in terms of risk versus reward.

• Weekly Market Environment Model Reading: Positive

Wishing you green screens and all the best for a great day,

David D. Moenning
Founder and Chief Investment Strategist
Heritage Capital Research

Indicator Explanations

Trend and Breadth Confirmation Indicator (Short-Term) Explained: History shows the most reliable market moves tend to occur when the breadth indices are in gear with the major market averages. When the breadth measures diverge, investors should take note that a trend reversal may be at hand. This indicator incorporates an All-Cap Dollar Weighted Equity Series and A/D Line. From 1998, when the A/D line is above its 5-day smoothing and the All-Cap Equal Weighted Equity Series is above its 25-day smoothing, the equity index has gained at a rate of +32.5% per year. When one of the indicators is above its smoothing, the equity index has gained at a rate of +13.3% per year. And when both are below, the equity index has lost +23.6% per year.

Price Thrust Indicator Explained: This indicator measures the 3-day rate of change of the Value Line Composite relative to the standard deviation of the 30-day average. When the Value Line's 3-day rate of change have moved above 0.5 standard deviation of the 30-day average ROC, a "thrust" occurs and since 2000, the Value Line Composite has gained ground at a rate of +20.6% per year. When the indicator is below 0.5 standard deviation of the 30-day, the Value Line has lost ground at a rate of -10.0% per year. And when neutral, the Value Line has gained at a rate of +5.9% per year.

Volume Thrust Indicator Explained: This indicator uses NASDAQ volume data to indicate bullish and bearish conditions for the NASDAQ Composite Index. The indicator plots the ratio of the 10-day total of NASDAQ daily advancing volume (i.e., the total volume traded in stocks which rose in price each day) to the 10-day total of daily declining volume (volume traded in stocks which fell each day). This ratio indicates when advancing stocks are attracting the majority of the volume (readings above 1.0) and when declining stocks are seeing the heaviest trading (readings below 1.0). This indicator thus supports the case that a rising market supported by heavier volume in the advancing issues tends to be the most bullish condition, while a declining market with downside volume dominating confirms bearish conditions. When in a positive mode, the NASDAQ Composite has gained at a rate of +38.3% per year, When neutral, the NASDAQ has gained at a rate of +13.3% per year. And when negative, the NASDAQ has lost at a rate of -8.5% per year.

Breadth Thrust Indicator Explained: This indicator uses the number of NASDAQ-listed stocks advancing and declining to indicate bullish or bearish breadth conditions for the NASDAQ Composite. The indicator plots the ratio of the 10-day total of the number of stocks rising on the NASDAQ each day to the 10-day total of the number of stocks declining each day. Using 10-day totals smooths the random daily fluctuations and gives indications on an intermediate-term basis. As expected, the NASDAQ Composite performs much better when the 10-day A/D ratio is high (strong breadth) and worse when the indicator is in its lower mode (weak breadth). The most bullish conditions for the NASDAQ when the 10-day A/D indicator is not only high, but has recently posted an extreme high reading and thus indicated a thrust of upside momentum. Bearish conditions are confirmed when the indicator is low and has recently signaled a downside breadth thrust. In positive mode, the NASDAQ has gained at a rate of +22.1% per year since 1981. In a neutral mode, the NASDAQ has gained at a rate of +14.5% per year. And when in a negative mode, the NASDAQ has lost at a rate of -6.4% per year.

Bull/Bear Volume Relationship Explained: This indicator plots both "supply" and "demand" volume lines. When the Demand Volume line is above the Supply Volume line, the indicator is bullish. From 1981, the stock market has gained at an average annual rate of +11.7% per year when in a bullish mode. When the Demand Volume line is below the Supply Volume line, the indicator is bearish. When the indicator has been bearish, the market has lost ground at a rate of -6.1% per year.

Technical Health of 100 Industry Groups Explained: Designed to provide a reading on the technical health of the overall market, this indicator takes the technical temperature of more than 100 industry sectors each week. Looking back to early 1980, when the model is rated as "positive," the S&P has averaged returns in excess of 23% per year. When the model carries a "neutral" reading, the S&P has returned over 11% per year. But when the model is rated "negative," stocks fall by more than -13% a year on average.

Weekly State of the Market Model Reading Explained:Different market environments require different investing strategies. To help us identify the current environment, we look to our longer-term State of the Market Model. This model is designed to tell us when risk factors are high, low, or uncertain. In short, this longer-term oriented, weekly model tells us whether the odds favor the bulls, bears, or neither team.

Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning, an advisor representative of CONCERT Wealth Management Inc. (CONCERT), is founder of Heritage Capital Advisors LLC, a legal business entity doing business as Heritage Capital Research (Heritage). Advisory services are offered through CONCERT Wealth Management, Inc., a registered investment advisor. For a complete description of investment risks, fees and services review the CONCERT firm brochure (ADV Part 2) which is available from your Investment Representative or by contacting Heritage or CONCERT.

Mr. Moenning is also the owner of Heritage Capital Management (HCM) a state-registered investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Neither HCM, Heritage, or CONCERT is registered as a broker-dealer.

Employees and affiliates of Heritage and HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or Heritage/HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.