Market Direction: BEARISH alert
issued 8/10/2017
The economy
Wall
Street had another disappointing week, its second in a row, as investors
continued to drag the major U.S. indices from their all-time highs. The Dow,
the S&P 500, and the Nasdaq finished with losses of 0.8%, 0.7%, and 0.6%,
respectively, while the small-cap Russell 2000 underperformed (-1.2%), dropping
to its flat line for the year.
Thursday's
session was perhaps the most notable of the week as the S&P 500 registered
its second-worst performance of the year. The major indices opened Thursday's
session with modest losses, but moved deeper into negative territory following
a rumor that President Trump's chief economic advisor Gary Cohn plans to resign
from his position following the president's controversial comments regarding
last weekend's events in Charlottesville, VA. The White House later declared
that the rumor was "100% false", but it did little to reverse the
market's downward trend.
True
or not, the rumor didn't do much to dispel the notion that working with the
president could be a political liability, especially considering that it came
on the heels of Mr. Trump's Wednesday decision to disband his
Manufacturing Council and Strategy & Policy Forum in response to several
CEOs leaving the two groups. The chief executives cited Mr. Trump's
controversial Charlottesville comments as the reason for their departures. If
Republicans in Congress start distancing themselves from Mr. Trump, it will be
that much harder for him to push through his pro-growth agenda.
However,
those concerns eased a bit on Friday after President Trump fired White House
Chief Strategist Steve Bannon, a decision that was well received by the market.
Mr. Bannon was the chief executive of Mr. Trump's presidential campaign and has
been described as perhaps the most polarizing figure within President Trump’s
inner circle. Therefore, in the absence of Mr. Bannon, the thinking is that the
president might dial back his rhetoric a bit, making it easier for the White
House to work with Congress in passing the president's pro-growth agenda.
Following this week's events, the fed funds futures market now points to the March 2018 FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 51.5%. Last week, the market expected the next rate hike to occur in June 2018 with an implied probability of 57.5%.
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By the numbers the weekly closing index numbers compared to the initial BEARISH recommendation closing numbers:
Stock Market Closing Numbers
|
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compared to Recommendation Numbers
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8/10/2017
|
8/18/2017
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Difference
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21,844.01
|
21,674.51
|
169.50
|
|
6,216.87
|
6,216.53
|
0.34
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2,438.21
|
2,425.55
|
12.66
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