Market Direction Week of September 25, 2017©

Market Direction: BULLISH alert issued 9/21/2017

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: U.S. stocks were marginally higher on the week, reaching record highs, following a 1.6% gain for the S&P 500 last week. The Federal Reserve announced that it will begin its balance-sheet normalization program next month. Additionally, the Fed said that it would keep the target range for its federal funds rate at 1.00%-1.25%, noting that the labor market still remains strong and inflation remains below its 2.0% target. The 2-year and 10-year Treasury yields, along with the dollar, rose after the Fed's announcement.

This week British Prime Minister Theresa May is trying to make progress in the ongoing Brexit negotiations. She will be in Florence Italy attempting to set out a mutually beneficial vision for the future where the UK is no longer part of the European Union.

Separately, the big news in Europe next week will be global markets’ reaction to German Chancellor Angela Merkel’s likely re-election. At the time of this writing, she was leading the election polls by a double-digit margin. She is seeking a 4th consecutive term, and while it would be a huge upset, a loss by Merkel on Sunday (9/24) could create significant market volatility before the open on Monday (9/25).

Responding to comments by U.S. President Donald Trump that he would destroy North Korean leader Kim Jong Un, the reclusive leader said he would make Trump pay dearly for his threats. After calling President Trump a “mentally deranged dotard”, Kim Jong Un stated that he is considering testing a hydrogen bomb in the Pacific Ocean.

How the market finished last week, the S&P 500 up 0.1%, the Nasdaq down 0.3%, and the Dow up 0.4%.

This Week: A slightly more hawkish than expected Fed dampened the post IRMA rally this week, despite the fact that interest rates were left unchanged, and the much anticipated balance sheet reduction plan was revealed.

 
Despite the VIX closing below 10 again for the first time since late-July and the SPX hitting new highs again earlier in the week, sentiment has dampened since the Fed meeting concluded on Wednesday. Another escalation in rhetoric between the United States and North Korea may also be fueling some anxiety in the near-term.  

A quieter week for the end of September, with US consumer confidence and durable goods the key economic events to watch out for. We also have final GDP revisions for the UK and US.

Earnings-wise, a trading statement from Imperial Brands is perhaps the most important event, as we enter another quiet period before the next US earnings season.

Economic Calendar: Durable Goods Orders (9/27), GDP (9/28), International Trade in Goods (9/28), Personal Income and Outlays (9/29)

 

Some of the major earnings announcements on deck: RHT, FDS, NKE, INFO, KBH.

 

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