Market Direction Week of November 20, 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: Stocks were lower for the second week in a row as equity markets saw moderate moves both up and down midweek. Wednesday's market decline and Thursday's subsequent rally gave investors a taste of volatility, but the Dow Jones Industrial Average has not experienced a 1% intraday drop over the past 66 trading days, a record streak. While progress was made on a new tax plan, investors are still focused on the differences between the respective U.S. House of

Representatives and Senate plans and the difficulties associated with reconciling them. Although changes in government policies can have a sizable effect on investment returns, the timing and impact are harder to predict than you might think.

Over 91% of the S&P 500 companies have released their Q3 earnings reports and so far 72% have beaten analysts’ EPS estimates while 67% have beaten on the top line. Compared to Q2 results the EPS beat is in-line (72% vs. 72%) but revenue is tracking slightly lower (67% vs. 68%).

Remember market volatility? It's been a while. Long enough, in fact, that you might not have recognized it, but that crooked line in the stock market chart last week was indeed volatility.  The S&P 500 dropped 0.7% midweek, with the Dow shedding 168 points in two days as markets reacted negatively to falling oil prices and worries surrounding the progress of tax reform.  Optimism returned on Thursday to the tune of a nearly 200-point gain, followed by a 100-point drop to end the week.

All told, the Dow fell 0.3% on the week, a dip that hardly registers as a material move. However, it's noteworthy insofar as we haven't seen anything that resembles normal volatility for some time. The S&P 500 moved by more than 0.50% on two separate days last week, the first time that's happened since July.  The market has risen in 10 of the last 13 weeks and hasn't posted a monthly loss since October 2016.  Looking ahead to 2018, we think stock market swings are likely to be more frequent and more material than we've experienced over the past year.

How the market finished last week, the S&P 500 down 0.1%, the Nasdaq up 0.5%, and the Dow down 0.3%.

This Week: Markets are a little more volatile this week but the uptrend is still intact.

Holiday-shortened weeks tend to exhibit relatively light volume which can, but not always, lead to higher volatility. The SPX has moved greater than 1.0% over the week of Thanksgiving in 5 out of the last 10 years. However, the index has been relatively flat on nearly all of the other occasions over that timeframe.

Thanksgiving week means that we have lots of US data crammed into the first three days, before Americans take Thursday off and enjoy a half day on Friday. Durable goods, and the Federal Open Market Committee (FOMC) minutes will be ones to watch. We also get eurozone consumer confidence, on Wednesday. Flash purchasing managers index (PMI) from the eurozone and the US will also provide some volatility.

While US earnings season is broadly over and done with, UK earnings and trading updates come thick and fast, including Compass, Kingfisher, and easyJet.

Economic Calendar: Leading Indicators (11/20), Durable Goods Orders (11/22), Consumer Sentiment (11/22), PMI Composite Flash (11/24)

Some of the major earnings announcements on deck: PANW, LOW, ADI, DE, DLTR.

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