There is a Lot Going on in the Markets this Week…

There is a Lot Going on in the Markets this Week…

There is a Lot Going on in the Markets this Week…

$DIA, $SPY, $QQQ, $VXX

US stocks posted a gainer in April, thanks solid corporate earnings and the anticipation of significant federal tax cuts.

The outperforming NAS Comp extended its winning streak to a 6th month running, while the DJIA followed with 5 of 6 positive monthly gainers

Nevertheless a growing number of pundits expressed concern about the extension of  The Trump Rally.

There are 4 events which will occur this week could shed light on the prospects for a market that has handsomely rewarded participants.

  1.  Post 100-Day Mark: Although the 100th day in office, marked on 29 April by President Donald Trump is an arbitrary milestone, this initial frame for a new administration attracts loads of media coverage and commentary. That means it also affects behaviors, announcements and initiatives. This date has passed so investors will be looking for greater clarity when it comes to the content and implementation of policies  especially those that influence economic growth and corporate earnings. Key among these is the follow-up to last week’s announcement of The Trump Administration’s tax reform proposal.
  2. Soft Data Vs Hard Data: After a week of continued divergence between soft (sentiment/confidence) measures and hard data, participants will pay close attention to the release on Friday of the April jobs report. Data on employment creation, wages and labor participation will shed light on the underlying health of the American consumer. The numbers will help assess how much of the Q-1 disappointing reading, especially for consumption, was caused by problematic seasonality adjustments and temporary or reversible factors Vs a weakening of growth dynamics.
  3. Meeting of the FOMC: The lagging hard data is to be a subject of discussion when the Federal Open Market Committee (FOMC), the Fed’s policy-making panel, meets Tuesday and Wednesday this week. Markets are not expecting any changes in policies, they will be interested in the Fed’s signals about the economy, specifically the extent to which it feels confident seeing through soft patches in data that have included GDP, inflation and retail sales. This influences the Fed’s plan for further rate hikes this year but also how it guides markets on the reduction of its balance sheet, ballooned as a result of QE-related purchases of securities.
  4. French Elections: The deciding 2nd round of voting on 7 May will end to the suspense about who will be the next President of France. Candidate, Marine Le Pen of the National Front, wishes to upend the existing economic institutional system and candidate Emmanuel Macron, an independent centrist, is promising change within the system. With the markets having priced in a high probability of a Macron win, there will also be interest in finding out how a “politician who timed his ascend to perfection” plans to exist with the mainstream parties in the National Assembly.

The Trump Rally has done much to bolster stocks and sentiment, both among households and corporations.

In the process, economist Mohamed A. El-Erian noted in a piece Monday, “… that both have been decoupled from the lagging and ultimately necessary improvements in economic fundamentals. To sustain further gains, potential potholes need to be sidestepped and further momentum needs to be gained (hard data).”

This week will shed some light on what is happening in these Key areas.

Monday, the US major stock market indexes finished at: DJIA-27.05 at 20913.46, NAS Comp +44.00 at 6091.59, S&P 500 +4.13 at 2388.33.

Volume: Trade on the NYSE came in light at 874-M/shares.

  • NAS Comp +13.2% YTD
  • S&P 500 +6.7% YTD
  • DJIA +5.8% YTD
  • Russell 2000 +3.7% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Neutral (0.20) Neutral (0.23) Bullish (0.27) Neutral (0.10)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (0.23) Neutral (0.12) Bullish (0.31) Bullish (0.25)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.31) Neutral (0.21) Bullish (0.46) Bullish (0.25)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.31) Bearish (-0.27) Bearish (-0.35) Bearish (-0.29)

Stay tuned…

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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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