Market Direction Week of September 11, 2017©

Market Direction: BEARISH alert issued 8/10/2017

Stock on the Radar (STAR)© was launched 6/19/2017 Sunday evening. When there is a new stock recommendations for the week it is typically made available late Sunday, so investors can prepare to take a position when the market opens Monday for trading.

Last Week Review: Stocks were lower on the week as political headlines and concerns surrounding Hurricanes Harvey and Irma weighed on investor sentiment. On the political front, President Trump struck a deal to push the debt ceiling and government funding legislation out three months. The deal, which was approved by both the House of Representatives and Senate, came despite criticism from some Republicans – most notably from Speaker of the House Paul Ryan. This conflict has piled on to the narrative that trust between the president and members of the GOP continues to deteriorate and could further complicate tax-reform negotiations. Market volatility could increase as political tensions rise.

The big news out of the Eurozone this week was ECB (European Central Bank) President Mario Draghi’s press conference where he stated that the governing council will leave its interest rates and bond-buying program the same. Draghi said they are discussing policy alternatives for the remainder of the year and for 2018, and more details will be announced in October.

The big news this week in Asia was the announcement on Tuesday (9/5) by North Korea that it had successfully detonated a hydrogen bomb, which raised fears that it is getting much closer to achieving its goal of a nuclear-tipped ICBM (intercontinental ballistic missile). Following this news, equities dropped about 1% in early trading before recovering about half of that drop before the close. Unlike previous dips which were met with strong buying activity, the markets have been much slower to recover from this one. In fact by the close on Thursday (9/7) equities were still down about 0.5% on the week.

How the market finished last week, the S&P 500 down 0.6%, the Nasdaq down 1.2%, and the Dow down 0.9%.

This Week: Dip buyers were far less enthusiastic this week than in recent weeks. The North Korea bomb test sparked only modest buying, as a vicious hurricane season and political dysfunction continue to keep the market in a consolidation phase.

Despite a lower SPX and a higher VIX, traders seem as gloomy at the end of the week as they were when it started. The economic calendar is relatively light again next week, and despite a deal to raise the debt ceiling and fund the government for 3 more months, equity markets seem to be very worried about North Korea and the potential damage from Hurricane Irma. These issues combined with more negative indicators means the consensus outlook for next week is still bearish and volatile.

UK data and the Bank of England are key events to watch out for, along with US CPI towards the end of the week.

Economic Calendar: JOLTS (9/12), PPI-FD (9/13), Consumer Price Index (9/14), Retail Sales Cost (9/15), Industrial Production (9/15)

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

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