Market Direction Weekly Closing Numbers

Market Direction: BULLISH alert issued 6/2/2016

The economy

Quarterly earnings were largely responsible for the differential in returns with the Nasdaq benefiting from upside surprises reported by heavyweights like AAPL, GOOGL, AMZN, FB, and CELG. Conversely, the Dow was pressured by weak results from XOM and disappointing comparable sales results from MCD. The broader S&P 500 split the difference between the Dow and Nasdaq.

In addition to receiving a boatload of earnings, investors had to recalibrate their expectations for monetary stimulus from global central banks. The Federal Reserve made no changes to its policy stance and only hinted at the possibility of a rate hike in the near term. The central bank shared its lukewarm outlook on Wednesday, two days before the Friday release of the advance reading of second-quarter GDP, which missed estimates (1.2%; Briefing.com consensus 2.6%). Also on Friday, the Bank of Japan called for just slight adjustments to policy, undershooting market expectations for aggressive stimulus measures. The Japanese yen rallied in response, pressuring the dollar/yen pair to a two-week low near 102.00.

Rate hike expectations receded throughout the past week. Since last Friday, the implied probability of a rate hike in December, estimated by the fed funds futures market, declined from 47.8% to 33.0%. The fed funds futures market does not expect the Federal Reserve to depart from its current target range until after July 2017.

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By the numbers the weekly closing index numbers compared to the initial BULLISH recommendation closing numbers: 

Stock Market Closing Numbers
compared to Recommendation Numbers
	6/2/2016	7/29/2016	Difference
Dow Jones	17,838.56	18,432.24	593.68
Nasdaq	4,971.36	5,162.13	190.77
S&P 500	2,105.26	2,173.60	68.34

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