Market Direction Week of October 2, 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. large-cap stocks were marginally higher on the week, while small-cap stocks gained nearly 3%. Conversely, bond prices fell as the 10-year Treasury yield continued to rise. The positive sentiment for small-cap stocks was fueled by a renewed focus on tax reform following the release of the Republican's tax code framework on Wednesday. U.S. small-cap stocks are more sensitive to changes in the domestic tax code than their large-cap counterparts because they generate more of their revenue inside the U.S. Even with last week's small-cap rally, slower-than-expected policy changes have dampened the performance of U.S. small- and mid-cap stocks so far this year. With uncertainty regarding the details and timing of changes to the tax code, we recommend owning a mix of both large-cap and small-cap stocks that aligns with your comfort with risk and long-term financial goals.

As I mentioned briefly last week, on Sunday ( 9/24) German Chancellor Angela Merkel was re-elected for a 4th consecutive term, as expected. She must now form a coalition government to lead Germany, and some of those partners may not share her level of enthusiasm for the European Union.

One of the biggest news items in Asia this week was the downgrade of China’s debt. S&P Global Ratings downgraded China’s sovereign debt, which aligns it with the Moody’s downgrade that occurred in in May. While the market reaction to both downgrades was minimal, China’s growth could become a headwind to emerging market growth in the coming months unless it deals with its growing debt problem. The size of China’s economy makes it an important player in the growth of many other Asian economies.

How the market finished last week, the S&P 500 up 0.7%, the Nasdaq up 1.1%, and the Dow up 0.2%.

This Week: The week kicks off with a major event, in the shape of the Catalan referendum on independence, so investors should be braced for volatility. Other major events include UK purchasing managers index’s (PMI) throughout the week, especially Wednesday’s services number, plus the two US ISM reports.

Finally, US job’s data is on the docket for the week, with Friday’s non-farm payrolls (NFP) providing their usual ‘must watch’ event. Corporate news by comparison is relatively thin, as we wait for the next US earnings season.

Throughout the week, volatility fell and the SPX pushed higher into record territory, so it is difficult to argue that sentiment hasn’t become more positive. While another escalation in rhetoric between the United States and North Korea could cause some anxiety in the near-term at any time, the prospect of tax reform (however unlikely it may seem) coupled with continued strong economic data, makes the overall outlook pretty good going into Q4.

Economic Calendar: ISM Mfg Index (10/2), ADP Employment Report (10/4), International Trade (10/5), Employment Report (10/6)

Some of the major earnings announcements on deck: LEN, PEP, STZ, FAST, C, JPM.

$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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