This Is What Happens When You Buy the Pullback


“Buy the pullback.” One of the oldest tricks in the book, and it’s what traders did last week.

The S&P 500 surged 4.3 percent between Friday, February 9, and Friday, February 16, for its biggest weekly gain since the start of 2013. There was a fair bit of news. But, the real story was money streaming back into the market after volatility spiked earlier in the month.

Most headlines seemed to paint a picture of continuing economic improvement at home and abroad. U.S. Housing roared back to life as builders shifted to single-family homes. Consumer sentiment rose more than expected as President Trump’s tax cuts instilled Americans with confidence in their jobs and wages. Retail sales missed and clearer inflationary signals emerged. (See this related article for more.)

Technology led the advance last week, surging almost 6 percent as investors stuck with the market’s top performing sector over the last year. Money also streamed into metals — especially after the Commerce Department recommended slapping big tariffs on foreign steel producers. Rising interest rates took a tool on utilities and real-estate investment trusts, which are typically valued for their dividends. Energy struggled as well amid signs of another oil glut.

There was also good news overseas, with Chinese credit growth blasting past estimates and South African President Jacob Zuma stepping down in the face of corruption charges. That helped give emerging markets their best week in almost two years. Then you also have the U.S. dollar sliding to its lowest level since late 2014.

IT firm CSRA (CSRA) was the top-performing member of the S&P 500, ripping 32 percent after getting acquired by General Dynamics (GD). Under Armor (UA) was second best with a 27 percent gain on the heels of a strong revenue number. Biogen (BIIB) and Ulta Salon (ULTA) led to the downside with drops of 8 percent and 7 percent, respectively.

This week is shortened by Monday’s President’s Day holiday. Wal-Mart Stores (WMT) and Home Depot (HD) are the big earnings reports today. Tomorrow brings existing home sales and minutes from the last Federal Reserve meeting. Initial jobless claims and crude oil inventories follow Thursday.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.