Market Direction Week of March 26, 2018©

Market Direction:BULLISH alert issued 2/15/2018

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. 

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Last Week Review: Stocks were under pressure, falling 6% on the week as investors worried that the imposition of U.S. steel and aluminum tariffs could spill into a global trade war. Market volatility has remained elevated recently, a trend we think is likely to linger. We believe the foundation of the bull market remains intact, with economic conditions improving both in the U.S. and abroad. However, rising policy uncertainties – ongoing Fed tightening, trade tensions and unpredictable geopolitical responses – have tempered investor sentiment.

There were multiple events that helped contribute to a sell-off in equity markets this week:

• On Wednesday the Fed raised interest rates 25 basis points, signaled that two more rate hikes this year are likely, and slightly increased their longer-term economic and rate hike projections.
• That same day President Donald Trump said that the administration intends to place a $60B tariff on Chinese goods (with emphasis on the high-tech industry), reigniting fears of a potential trade war. Earlier this morning China announced that it intends to impose reciprocal tariffs on $3B of U.S. imports on products such as pork, steel, wine and fruit.
• The U.S. government initially passed a $1.3T spending bill to avert a government shutdown but earlier this morning President Trump tweeted that he might veto the bill, citing immigration.
• Facebook (FB - $0.10 to $164.79) lost 10% of its value this week on data privacy concerns which likely contributed to weakness in the overall technology sector.

Through Thursday’s close the S&P 500 (SPX) lost roughly 4% on the week, but the index is attempting to find some support early Friday morning:

How the market finished last week, the S&P 500 down 6.0%, the Nasdaq down 6.5%, and the Dow down 5.7%.

This Week: Volatility is back in focus on trade war concerns, but a modest rebound appears to be likely next week if we can avoid the headline risk. The recent relative weakness in the NASDAQ is a little concerning given that technology has been a place that investors turn to during past sell-offs. Additionally, the technicals across the major U.S. indices don’t currently look bullish but that could change by today’s close (for example if the RUT, COMPX & DJT can close above their respective 100-day SMA’s). Additionally, given how much ground we lost this week, we could be at a point where markets rebound in the absence of any new “tariff talk.” Therefore, we will likely see continued volatility but I think the odds for a relief rally next week are more likely than not.

The run-up to Easter sees a quiet week for markets on both the corporate and economic fronts. Only consumer confidence in the US is likely to provoke much comment, but with its initial public offering (IPO) looming, Spotify's financial forecasts will provide plenty of interest.

Trade wars will also dominate the week, after the imposition of tariffs on China and a response from Beijing prompted a significant sell-off in equities last week.

Economic Calendar: Consumer Confidence (3/27), GDP (3/28), International Trade in Goods (3/28), Personal Income and Outlays (3/29) 

Some of the major earnings announcements on deck: RHT, LULU, SONC, STZ, WBA.

$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, email us. Share with a friend. Cha-ching.

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