Market Direction Week of January 29, 2018©

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 rallied to fresh record highs this week, boosted by stronger-than-expected earnings reports from a number of companies. In addition to solid fourth-quarter results, many companies provided positive outlooks for 2018 as a result of improving global economic growth and recently passed tax reform. All sectors advanced on the week, with telecom the strongest sector and industrials posting the smallest gains. 

This week ECB (European Central Bank) President Mario Draghi said he “sees very few chances of a rate increase this year”. Separately, President Trump arrived at the World Economic Forum in Davos Switzerland on Thursday and spoke in the morning on Friday (1/26). President Trump met on Thursday with UK Prime Minister, Theresa May and Israeli Prime Minister, Benjamin Netanyahu. On Friday he met with Rwandan President and Chairman of the African Union, Paul Kagame and Swiss President, Alain Berset.

In response to an alarming number of complaints, on Wednesday (1/24) an official at the Japanese National Consumer Center said, "We want people to stop trading virtual currencies without understanding the transaction system and risks because it is dangerous". This warning came despite (or possibly because of) Japan’s position as the most active cryptocurrency market in the world.

Separately, Chinese officials speaking in Davos this week outlined key policy initiatives for the next few years including; a transition from a phase of rapid growth to one of high-quality development; finding opportunities for business across the world; and a continued emphasis on growth in the service sector over the manufacturing sector.

How the market finished last week, the S&P 500 up 2.2%, the Nasdaq up 2.3%, and the Dow up 2.1%.

This Week: Congress passed its third short-term CR (continuing resolution) in a row on Monday (1/22) to reopen the government. Unfortunately, it was only a “punt” and simply sets up another showdown in early February. In the interim, strong earnings, tax cuts and at least stable economics will likely continue to push the stock market to more record highs in the near-term.

The CR deal did not resolve the DACA (Deferred Action for Childhood Arrivals) issue, which has to be dealt with by March 5^th, nor did it provide funding for the government through the September 30^th fiscal year-end. However short it was, it was a shutdown so I have updated my Government Shutdown table to include it, and I have added a placeholder for the one that is likely to start on 2/9. Since equities rose on Monday (1/22) history still says a shutdown is unlikely to hurt the markets in the long-term; and could even be bullish.

US job numbers and the Federal Reserve (Fed) meeting are the key events to watch out for, with the latter interesting as it is Janet Yellen’s last outing in charge. In addition, we get China's purchasing managers index (PMI) data, along with the first two of the UK’s monthly PMIs.

Earning season rolls on, with Thursday notable for a host of big tech names, including Amazon and Apple. We also have full-year numbers from FTSE 100 heavyweights AstraZeneca and Unilever, plus a trading update from dividend stalwart Vodafone.

Economic Calendar: Personal Income and Outlays (1/29), FOMC Meeting Begins (1/30), FOMC Meeting Announcement (1/31), Employment Report (2/2)

Some of the major earnings announcements on deck: MSFT, BA, FB, PFE, AAPL.

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