#$ctrx

Barring a dramatic development today, the S&P 500 is going to end Q1 with a modest gain, and notch its ninth-straight quarterly rise. 

Given all the headwinds of a strong dollar, downward earnings revisions, fear of a Fed rate hike (which come and go), oil volatility/MidEast unrest, the U.S. market has held up relatively well. 

One explanation: The supply of stock is down as M&A heats up and the IPO market cools.

“Dealmaking is off to a running start this year,” The FT reports. “The value of mergers and acquisitions struck in the first three months is up 21 per cent on a year ago making this the fastest start to a year since 2007.” 

Healthcare is driving the action with three more deals announced Monday: UNH buying Catamaran (CTRX) for $12.8B in cash, Horizon (HZNP) buying Hyperion Therapeutics (HPTX) for $1.1B and Teva Pharmaceuticals acquiring Auspex Pharmaceuticals (ASPX) for $3.2B.

“But it was US ketchup maker Heinz that provided the highlight of thefirst quarter, with the biggest deal of 2015 so far. Its takeover of US consumer foods group Kraft,” the FT adds, noting US dealmaking was up 30% in Q1 to $399B -- almost halfof all global M&A.

Meanwhile, "just 27 firms have priced IPO deals and raised $4.9 billion in the first quarter, down from 65 companies which raised $12 billion a year ago, according to Ipreo,” Yahoo Finance’s Aaron Pressman reports. “That would make the current quarter the slowest since 2010.”

Pressman’s post came out ahead of today’s Go Daddy IPO but the Internet domain registrant is looking to raise $418 million. That pales in comparison to the $104.3 BILLION of buybacks announced just in February, almost double year-ago levels. 

In sum, the big picture story remains the same: Dealmaking and buybacks are removing more stock from the market than is being replaced by IPOs and secondaries. Assuming demand remains constant (and fund flows show no big changes to date), the drop in supply of stock helps explain the bullish resistance to “bad news” so far in 2015. 

A few more data points to consider:

The last time buybacks reached a monthly record of $99.8 billion in July 2006, the S&P 500 advanced 23 percent in the next 14 months before hitting an all-time high, Bloomberg reports.

“Only three other times since WWII has the S&P 500 witnessed nine straight quarters of price gains. Each of these prior times recorded price increases in their 10th quarter averaging 8.1%.” -  Sam Stovall, S&P Capital IQ

5 Trade ideas excerpted from the detailed analysis and plan for premium subscribers.

CNOOC, Ticker: $CEO

CNOOC, $CEO, sold off with the Crude Oil decline, but began a consolidation process in December. It ended the week pressing against downtrending resistance and the 20 day SMA, unable to move over it. But the MACD and RSI are diverging higher. The RSI is making a new 4 month high as it moves over the mid line. Watch for price to follow higher.

Catamaran, Ticker: $CTRX

Catamaran, $CTRX, moved higher off of a bottom in October into a consolidation zone that started in early December. Friday left the price testing resistance for the second time. With the MACD crossing up last week as a buy signal, and the RSI rising watch for a break of resistance higher.

KKR, Ticker: $KKR

KKR, $KKR, has made a Champagne Coupe Bottom™, finding itself at the top of the rim Friday. As it arrives there the RSI is rising and strong while the MACD is crossing up, giving a buy signal.

Lear, Ticker: $LEA

Lear, $LEA, rose from the October low into a consolidating pattern as well. With a rising trend support, the ascending triangle is building now as price sits at resistance Friday. The RSI is rising and bullish while the MACD is crossing up. You know the drill.

Stamps.com, Ticker: $STMP

Stamps.com, $STMP, has run through a long Cup and Handle pattern through 2014. Friday showed signs of the price breaking the handle to the upside. This came with the RSI bouncing off the lower limit of the bullish zone and the MACD turning, and heading for a bullish cross up.

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which, heading into the last week of January sees the equity markets churning, but at different paces.

Elsewhere look for Gold to continue in its uptrend while Crude Oil continues lower. The US Dollar Index also looks to continue higher while US Treasuries consolidate in the uptrend. The Shanghai Composite is taking a breather in its uptrend but Emerging Markets are breaking higher, at least in the short term.

Volatility looks to remain low but drifting gently higher over time slowing the wind at the back of the equity market. The equity index ETF's are reacting differently to these factors. The IWM is continuing its consolidation but with sings it may break higher, while the SPY consolidates in its uptrend, perhaps passing the baton to the small caps. The QQQ has been acting mostly like the SPY but looks much stronger, with a possible break of a bull flag higher brewing. Use this information as you prepare for the coming week and trad'em well.