Although the effects of the mini-crash that took place three weeks ago are still clearly in the air, the market is healing, and investors are slowly regaining confidence after the sudden spike lower. Volatility is well below the levels of the post-crash days, and the major indices recovered a large part of their losses, with especially the Nasdaq bouncing back strongly. Amazon (AMZN) played a very important role in the advance of the tech benchmark, hitting $1500 per share for the first time ever last week. Interestingly, it happened thanks to the disappointing online numbers from Walmart (WMT), which led to the largest one-day point decline in the retail giant’s history after its earnings report, while lifting its competitors’ shares.

It was a very quiet holiday-shortened week regarding economic releases, with the main focus being on the minutes of the January Fed meeting. The governors of the Central Bank voiced their concerns about inflation. Although, with no strong indication of the likely number of rate hikes this year, the market had a hard time “pricing in” the release. Treasury yields continue to hit multi-year lows, with the short end of the curve now trading at levels not seen since 2008. Existing home sales plunged lower unexpectedly in January, and as that segment of the housing market is usually the most sensitive to mortgage rates, the next few months could bring more of the same.

The technical picture underlines the leadership of the Nasdaq as the technology index spent the week above its 50-day moving average, while the Dow and the S&P 500 were struggling to cross the crucial indicator until Friday. All three benchmarks are still well above their rising 200-day moving averages, as the long-term trend is still undoubtedly positive. Small caps performed similarly to the broader market, and the Russell 2000 had been just below the short-term moving average throughout the week, while also being clearly above its long-term indicator. The Volatility Index (VIX) had a quiet week, as the fear gauge first edged higher, then drifted lower as stocks stabilized, closing below the key 20 level on Friday.

Market internals were broadly in-line with the price action in the major indices, but the Gorilla would have been glad to see some positive divergences popping up to support the quick post-crash recovery. The Advance/Decline line drifted sideways together with stocks throughout the week, even as advancing issues outnumbered declining stocks by a 3-to-1 ratio on the NYSE and by a 4-to-1 ratio on the Nasdaq. The average number of new 52-week highs showed a healthy increase on both exchanges, rising to 63 on the NYSE, and 90 on the Nasdaq. The number of new lows was stable in the meantime, edging higher to 60 on the NYSE, and dropping to 45 on the Nasdaq. The percentage of stocks above their 200-day moving average dipped lower again, although it remained above 50%. It currently stands at a still very low 56%.

Short interest stabilized at a higher level than what we have been used to in recent months following the epic short-squeeze during the bounce, and the most-shorted issues continued to perform well, despite the mixed price action in the indices. The Trade Desk (TTD) surged by 20% after publishing its quarterly earnings, and given the short interest of 44%, a lot of bears could still be looking for the exits. Although the rally in Dillard’s (DDS) halted near the January high, the short interest of 46% could fuel a breakout soon, with plenty of upside potential. Diamond Offshore (DO) concluded a month-long losing streak last week, jumping more than 10% from its recent low, while also skyrocketing higher on the list of stocks with the highest days-to-cover (DTC) ratios, reaching a reading of 17.

After a very quiet week, the economic calendar will be busy again, with crucial releases coming out every day except Friday. New home sales are scheduled for Monday, while the durable goods report and the CB Consumer Confidence Index will be released on Tuesday. Wednesday will see the key prelim GDP print and the pending home sales data, with the ISM manufacturing PMI and personal spending hitting the market on Thursday. Apart from the economy, the Gorilla will continue to keep an eye on Treasury yields, while still focusing on the key technical levels following the recent turmoil. The bulk of the earnings season is now behind us, but Warren Buffet’s Berkshire (BRK-A), and Priceline (PCLN) still have the potential to move markets this week. Stay tuned for an eventful week!