Market Direction Week of September 4, 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 finished higher for the second week in a row, helped by upwardly revised GDP growth that reached 3% for the first time since 2015. Other tailwinds for the market included a rejuvenated focus on possible tax reform and better-than-expected manufacturing data. However, these positives were also met with headwinds, including the devastation brought from Hurricane Harvey and continued geopolitical tensions with North Korea. The mix of both stronger headwinds and tailwinds has brought stock market volatility off of the historic lows witnessed in late-July. More normal stock market volatility is likely to persist, and that could mean more frequent pullbacks.

The most interesting development in the Eurozone this week from my perspective, was the strength in the euro currency. On Tuesday morning 8/29, the euro rose to $1.20 which was the highest level since January 2015.

The big news this week in Asia was Japanese Prime Minister Shinzo Abe’s announcement early in the morning on Tuesday (8/29) that North Korea had fired a ballistic missile over the Tohoku region at the northern end of Japan. On that news, the overnight equity futures dropped about 1% pre-open, but surprisingly the markets shrugged it off and closed modestly higher by the end of the trading session.

How the market finished last week, the S&P 500 up 1.4%, the Nasdaq up 2.7%, and the Dow up 0.8%.

This Week: Dip buyers stepped in following another missile launch from North Korea this week, and a market that has been consolidating for about 3 weeks came back to life.

While there are reasons for bullishness there was a significant amount of disagreement among the indicators.

Key events to watch out for this week include the construction and services purchasing managers index (PMI) from the UK, and the non-manufacturing PMI from the US. Central banks market updates include the Australian and Canadian banks, plus of course, the all-important European Central Bank (ECB) policy decision.

Company earnings will be dominated by UK housebuilders, and fund manager Ashmore. US earnings are relatively sparse, but include Dell and Hewlett Packard Enterprises. 

Economic Calendar: Factory Orders (9/5), International trade (9/6), Beige Book (9/6), Productivity and Cost (9/7), Wholesale Trade (9/8)

Some of the major earnings announcements on deck: RH, HDS, KR, DVMT, HPE.

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