Market Direction Week of July 30, 2018©

Market Direction:BULLISH alert issued 2/15/2018 

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Last Week Review: Q2 earnings season hit its peak last week. Now with 261 companies (53%) of the S&P 500 having reported, earnings are still strong.

Stocks finished higher for the week, as companies announced mostly solid second-quarter earnings reports, and the U.S. and Europe made some progress on trade negotiations. While growth in the economy and earnings are both expected to remain favorable for stocks, concerns about trade and interest rates will likely cause periods of volatility.

On Wednesday (7/25) President Trump seemed upbeat during the pre-meeting press conference before he met with EU President Jean-Claude Juncker. During the press conference, Trump reiterated a tweet he sent on Tuesday proposing that “both the US and the EU drop all tariffs, barriers and subsidies”. Markets rallied after the meeting on news that the US had agreed to postpone imposing tariffs on European car imports. While these developments may sound good, it is extremely unlikely that the US would eliminate the “Chicken Tax”; which is actually a 25% tariff on light trucks imported to the US. This tariff has been in place since 1964 and is a key reason the top 3 best-selling vehicles in the US for many years have been the Ford F Series, the Chevy Silverado and the Ram Pick Up. These 3 alone total about 3 million vehicles per year. Equally unlikely is the elimination of nearly $20B in farm subsidies the US government spends each year, as nearly 900,000 farmers would be impacted.

A proposed $44B merger between San Diego-based Qualcomm and Netherlands-based NXP Semiconductors, which would have been the largest chip company acquisition in history, was terminated this week due to rising trade tensions between China and the US. This move is largely seen as a retaliatory measure by China in its ongoing tariff war with the US. Separately, on Friday (7/27) North Korea apparently released the remains of US soldiers lost during the Korean conflict 65 years ago. The remains will be DNA tested in Hawaii for identification.

How the market finished last week, the S&P 500 up 0.6%, the Nasdaq down 1.1%, and the Dow up 1.6%.

This Week: Technical factors, economic reports, earnings, and monetary policy are all converging into what is likely to be a very uncertain stock market this week.

While Q2 earnings continue to be strong, traders have punished a few bellwether companies for missing earnings targets or cautious guidance, and the dip buyers appear to be on the sidelines at the moment. Most of the stock market indicators last week were bullish, but a few of the indicators have made complete reversals and in a rather abrupt manner. You should expect more volatility this coming week.

A massive week is ahead for markets, with both economic and corporate releases vying for the limelight. On the economic front, the central banks will no doubt grab the limelight, with rumors of the Bank of Japan (BoJ) changing their policy stance and the Bank of England (BoE) widely expected to raise rates. US jobs will also likely bring a sharp rise in volatility, with the recent 4.1% gross domestic product (GDP) reading for the second quarter (Q2) pointing towards a buoyant economy.

Economic Calendar: Personal Income and Spending (7/31), Chicago PMI (7/31), FOMC Rate Decision (8/1) Factory Orders (8/2), Employment Report (8/3)

Some of the major earnings announcements on deck: AAPL, TSLA, CAT, BIDU, PFE.

$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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