Market Direction Week of May 28, 2018©

Market Direction:BULLISH alert issued 2/15/2018

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Last Week Review: Stocks edged slightly higher on the week, driven by a broad range of factors. Progress and setbacks in trade negotiations with China prompted swings between optimism and pessimism, while ongoing diplomatic tensions with North Korea weighed on the market's mood. Commentary from the Fed was also in focus, signaling that the path of gradually rising rates remains intact. We expect the focus on interest rates and trade negotiations to drive volatility for the remainder of the year.

On Thursday President Trump announced his intention to impose new tariffs on imported cars and trucks, citing issues of national security. Germany would be impacted the most as Europe’s largest auto exporter, in addition to Asian countries such as South Korea and Japan. This announcement will further strain German/US relations, even as Germany is facing previously announced steel and aluminum tariffs that are due to begin on June 1.

After news reports last week indicated that North Korea was no longer interested in meeting with the US, the tentative meeting between Kim Jong Un and President Trump was cancelled. This week however, North Korea said it was still open to talks with the United States, and now President Trump has resurrected the on-again, off-again summit tentatively scheduled for June 12th in Singapore.

How the market finished last week, the S&P 500 up 0.03%, the Nasdaq up 1.1%, and the Dow up 0.02%.

This Week: Again, this week the SPX continued to track the long-term uptrend. This is very encouraging because if it can continue, the potential technical “death-cross” and the urge to “sell-in-May and go away” might both be narrowly avoided.

Next week: is a very busy week from an economic standpoint, with a revision on Q1 GDP, reads on inflation (PCE), manufacturing (ISM), and the all-important monthly employment situation. With weekly jobless claims just barely above a 48-year low, it would not surprise me to see nonfarm payrolls above 200k. However, with a -0.2% drop in the unemployment rate last month, I think it will remain unchanged at 3.9% this month as broadening labor shortages continue. Good news in the labor market has been so good for so long, that more strong reports are likely to stoke inflation fears again. As a result, I see few potential upside catalysts for the market again next week.

US non-farm payroll (NFP) reports dominate the economic calendar, but we also get eurozone and German consumer price index (CPI), and Chinese purchasing managers indexes (PMIs). At the end of the week we have UK manufacturing PMI and the first Institute of Supply Management (ISM) reading from the US.

Option Volumes:

As May approaches month-end, aggregate option industry volume in May is averaging 18.6M contracts per day. That is just below the April level of 19.3M contracts per day but above the May 2017 level of 17.2M contracts per day.

Economic Calendar: Case-Shiller Home Price Index (5/29), GDP (5/30), Personal Income & Spending (5/31), ISM Mfg Index (6/1), Employment Report (6/1)

Some of the major earnings announcements on deck: HPQ, CRM, COST, DG, ULTA.

$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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