Commentary: Paul Ebeling on Wall Street

Commentary: Paul Ebeling on Wall Street

$DIA, $SPY, $QQQ, $RUTX, $VXX

FLASH: Positive finish to a positive week. Again, the longest Bull market in history has relied on low interest rates, and weakness in jobs. So, if everyone else is worried about stocks, capitalize on the fear and make a a lot of money as the market climes the wall of worry, fear is your friend.

The stock market wrapped last week on a high note, as upbeat results from Alphabet (GOOG 1250.41, +118.29, +10.5%) and encouraging Q2 GDP data helped lift the S&P 500 (+0.7%) and Nasdaq Composite (+1.1%) to record closes. The Russell 2000 rose 1.1%, while the DJIA increased just 0.2%. 

Friday’s session, much like in the days before, included its fair share of better-than-expected earnings reports.

Alphabet gets the lead due to its mega-cap status, but honorable mentions include Starbucks (SBUX 99.11, +8.13, +8.9%) and Twitter (TWTR 41.80, +3.68, +9.7%). Dow component McDonald’s (MCD 215.58, +1.14, +0.5%) under-performed despite positive results.  

Besides earnings, the fact that the US economy continues to grow at a healthy pace is investor positive. The advance estimate for Q-2 GDP increased 2.1%, a modest slowdown from last Quarter, but not as much as expected due to strong consumer spending.

That being the case, here it my outlook for the week ahead, already the S&P 500 futures are running high, as follows;

Pundits are calling for the Fed to stick to its mandate and ignore the usual election cycle games. A broadside about the ineffective trade policies and the damage that is doing to growth, employment and price stability would also be an appropriate response to the administration’s forays into Fed’s policies.

And that the markets should join the growing concerns about destructive trade disputes and the toll deficits are taking on outlook for corporate sales and profits.

And that would show their analytic sophistication instead of throwing tantrums and clamoring for cheap money.

But, President Trump continues to hammer the Fed, and the market smells the cheap money coming.

The White House claim that trade talks with China are now back on track sounds like wishful thinking to a US trade official who sees them in a “quiet period.”

Things, in fact, look so negative, and in a total deadlock, that there may be no acceptable solution in sight during this administration’s current mandate but for the Fed to align.

There is no recession in sight and the US stock market continues to make new highs as it climbs the proverbial Wall of Worry.

The S&P 500 is on track for its best YTD return in more than 20 years, the catalyst: cheap money ahead.

The broad-market benchmark is up 20.7% YTD, which would represent the richest year-to-date return for the S&P 500 SPX through July 26 since Y 1997, when it gained 26.74%, according to Dow Jones Market Data.

Information technology shares XLK have led the rally in Y 2019, up 33.2% YTD, with consumer-discretionary shares XLY +25%, and the communication-services sector XLC + 24.8% rounding out the Top 3 performing sectors among the S&P 500’s 11 so far on the year representing the best YTD return for the 123-anni blue-chip gauge since 2013 and the best for the tech-heavy NAS Comp since Y 2003.

  • NAS Comp +25.5% YTD
  • S&P 500 +20.7% YTD
  • Russell 2000 +17.1% YTD
  • DJIA+16.6% YTD

At this time last year, the S&P 500 was up just 6.1%, the DJIA was 3.3% higher and the NAS Comp boasted a 13.7% return through July 26, 2018.

The catalyst for the rally has been clear: cheap-money policies from global central banks and it does not appear that is is all priced in yet. But, the Green lights are flashing, as Fed Chairman’s actions indicates that he likes a strong economy.

Add to all of the above

US Homeowners enjoy a $9.7-T gainer in equity in last 10 years, up from $6.1-T in Q-1 of Y 2009.

We are lifting up forgotten communities, creating exciting new opportunities, and helping every American find their path to the American Dream, the Dream of a great job, a safe home, and a better life for their children.”–President Donald J. Trump

HeffX-LTN’s overall technical outlook for the 3 major US stock market indexes if Bullish at the week ended 27 July 2019, and into this week.

Have a terrific week

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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