Market Direction Week of September 12, 2016

Market Direction: BULLISH alert issued 6/2/2016

Last Week Review: U.S. stock indexes continued to trade in a very tight window until Friday, when they fell in response to the European Central Bank's decision to defend its current monetary policy instead of increasing its stimulus plans as the market expected. In addition, comments made by a Federal Reserve (Fed) voting member increased the probability that the central bank will raise rates at its meeting later this month, putting further pressure on stocks. Markets will continue to focus on monetary policy here at home and overseas, and central bank decisions that are outside of the market's expectations may increase market volatility going forward.

How the market finished last week, the S&P 500 down 2.4%, the Nasdaq down 2.4%, and the Dow down 2.2%.

This Week: There doesn’t appear to be a lot of significant reports early next week but Thursday looks like it will be stacked. Not only will we get U.S. Retail Sales and a number of U.S. manufacturing reports (which have signaled some weakness recently), but the Bank of England will hold a monetary policy meeting which should provide some insight into the health of the post-Brexit environment.

Equity markets drop the most in two months on higher rate fears. Will the selling persist next week?   

While I’m not necessarily convinced that the Fed is going to raise rates at the September 20-21^st FOMC meeting, I think there is enough concern to keep investors cautious until we get to that date. Therefore I suggest keeping an eye on the 10-year and taking a relatively cautious stance over the near-term. 

Economic Calendar: NFIB Small Business Optimism Index (9/13), Import and Export Prices (9/14), PPI-FD (9/15), Retail Sales (9/15), Consumer Sentiment (9/16)

Some of the major earnings announcements on deck: ORCL, LEN, FDX, BBBY, AZO.

 

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