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 higher on the week as investors continued to process the potential impact of tax reform, which could be voted on next week. While bitcoin continued to capture investors' attention, fundamentals were also in focus as the Federal Reserve (Fed) announced that it would raise the target range for its federal funds rate by 0.25% to 1.25%-1.50%, its third interest rate hike this year. The Fed continued to express its favorable view on the economy, slightly upgrading its outlook for GDP growth. We agree with the Fed, and we think U.S. economic growth is likely to improve slightly to about 2.5% as corporate and personal tax rates are cut in 2018. While the Fed is expected to raise rates two to three times in 2018, the path will be dependent on incoming economic data. We believe volatility will eventually increase, but a patient Fed combined with solid economic and earnings growth can provide an environment that supports financial markets.
This week the European Central Bank (ECB) held interest rates steady, but sharply increased its Eurozone growth forecasts for 2018 from +2.2% to +2.4%.
$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.
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 higher on the week as investors continued to process the potential impact of tax reform, which could be voted on next week. While bitcoin continued to capture investors' attention, fundamentals were also in focus as the Federal Reserve (Fed) announced that it would raise the target range for its federal funds rate by 0.25% to 1.25%-1.50%, its third interest rate hike this year. The Fed continued to express its favorable view on the economy, slightly upgrading its outlook for GDP growth. We agree with the Fed, and we think U.S. economic growth is likely to improve slightly to about 2.5% as corporate and personal tax rates are cut in 2018. While the Fed is expected to raise rates two to three times in 2018, the path will be dependent on incoming economic data. We believe volatility will eventually increase, but a patient Fed combined with solid economic and earnings growth can provide an environment that supports financial markets.
This week the European Central Bank (ECB) held interest rates steady, but sharply increased its Eurozone growth forecasts for 2018 from +2.2% to +2.4%.
After
the US Fed hiked interest rates by 0.25% on Wednesday (12/13) the People’s Bank
of China (PBOC) quickly followed suit with a very modest 0.05% rate hike. Some
saw the move as both symbolic and also small enough to have virtually no impact
on Chines GDP growth levels.
How
the market finished last week, the S&P 500 up 0.9%, the Nasdaq up 1.4%, and
the Dow up 1.3%.
This Week: With a light economic calendar
and very few earnings reports to focus on, market action next week is likely to
be dominated entirely by activity in Washington DC regarding the tax bill. If
the bill passes, equities will likely move higher and it would not be
surprising to see the VIX index hit an all-time closing low.
The
one caveat of course is what happens if the tax bill is defeated? No one knows
for sure, but one way to answer this question is that the house bill was passed
on 11/16 and the SPX jumped about 21 points (+0.8%) that day. It seems very
reasonable that most, if not all of the gain since 11/16 would be at risk in
the event the bill fails. While a 114 point drop in the SPX may not sound
catastrophic (and it really isn’t), it would be the largest point and
percentage drop of 2017.
Given
recent past patterns, I also think the immediate reaction to the
"surprise" failure might result in a decline as much as -188 SPX
points (-7%) immediately, before quickly recovering to a more modest -4.4%
decline within a few days. Lately most surprises have resulted in overly
exaggerated market pullbacks followed by a quick recovery of at least half the
initial decline. Additionally, those specific sectors with the highest effective
tax rates that have benefitted recently would likely pullback even further. I
believe the odds of passage are fairly high.
Economic
Calendar: GDP (12/21), Philadelphia Fed Business Outlook Survey (12/21),
Durable Goods (12/22), Personal Income and Outlays (12/22)
Some of the major earnings announcements on deck: FDX,
RHT, WGO, NKE, KMX.
$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.
Related Link: http://www.stockmarket-direction.com/
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