Market Direction: BULLISH alert
issued 11/10/2016
Last Week Review: Stocks finished higher
for the week and touched fresh highs on Friday, fueled by optimism that growth
in both the economy and corporate earnings continues to gain positive momentum.
Telecom stocks led gainers, while financials and energy were the only two
declining sectors on the week.
The U.S. economy is near "full employment", a term that may sound positive (like "clean bill of health") or fictitious (like "too few taxes"). On one hand, the current 4.3% unemployment rate – a more than 16-year low – that is indicating full employment can be interpreted as a signal that the economy is poised for faster growth, with consumer spending supported by a strong labor market. On the other hand, this raises the question, "does full employment mean there's little room left for improvement in the job market?"
The U.S. economy is near "full employment", a term that may sound positive (like "clean bill of health") or fictitious (like "too few taxes"). On one hand, the current 4.3% unemployment rate – a more than 16-year low – that is indicating full employment can be interpreted as a signal that the economy is poised for faster growth, with consumer spending supported by a strong labor market. On the other hand, this raises the question, "does full employment mean there's little room left for improvement in the job market?"
We
think the former carries more weight right now. While it's true that the
healthy progress of the labor market improvement over the past several years may
moderate the pace of monthly job gains ahead, there is still room for
improvement. We think this offers key support to economic growth, which should
support a continued lift in corporate earnings, in turn offering support to the
ongoing bull market (albeit with larger and more frequent bumps along the way).
How
the market finished last week, the S&P 500 up 1.0%, the Nasdaq up 1.5%, and
the Dow up 0.6%.
This Week: The U.S. Q1 earnings season
is basically over but the results were impressive. Since the SPX hit yet
another new high on Thursday (6/1), I think it makes sense to revisit the bull
market cycles chart again. As you can see below, this bull market is now 3005
days long and is +259.2% since it started on 3/10/09. Additionally, it is +2.8%
so far in its 9th year (since 3/10/17).
With
a light economic agenda a week before the Fed meeting, politics and modest
profit taking will likely drive the markets in the near-term.
A
massive week ahead for Europe and in particular the UK given Monday’s services
PMI and of course Thursday’s general election. The polls have been narrowing
and anything other than a Tory majority would be a major curveball for
financial markets. Thursday also sees the European Central Bank (ECB) provide
their latest rate decision, which is likely to play second fiddle to their
statement, as traders look out for the elusive reference to tapering.
Economic
Calendar: Productivity and Costs (6/5), PMI Services Index (6/5), Factory
Orders (6/5), ISM Non-Mfg Index (6/5), JOLTS (6/6)
Some of the major earnings announcements on deck: PLAY,
AMBA, HDS, MIK, SJM.
$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, write us. Share with a friend. Cha-ching.
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