Market Direction Week of September 10, 2018©

Market Direction:BULLISH alert issued 2/15/2018 

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Last Week Review: Last week, U.S. large-cap stocks fell by more than 1% for the first time in two months. In addition, the technology-heavy NASDAQ Index logged its worst week in nearly six months, falling 2.6%. August's solid jobs report, which showed that the economy added more than 200,000 jobs and that wages grew at the fastest pace since 2009, failed to overcome downward pressure of escalating trade tensions. Uncertain trade negotiations are a headline risk, but rising wages point to continued support for consumer spending, which accounts for 70% of economic growth. A healthy consumer and a strong economy provide a good environment for stocks.

Dow Jones Industrial Average ($DJI): The Dow is selling off more (on a % basis) than the other major U.S. indices today but was actually positive on the week as of yesterday’s close. Keep in mind that the Dow still hasn’t surpassed its January all-time high (unlike the other major indices) but it has established a nice uptrend over the past six weeks.

NASDAQ Composite ($COMPX): The NASDAQ pulled back from last week’s all-time highs (~8,133) which appears to be driven by overall market consolidation, along with recent weakness in semis (MU dropped 10% yesterday on DRAM pricing concerns) and “FANG” stocks (FB dropped below its late-July post-earnings low of ~$166 this week). It’s difficult to ascertain where we go from here but keep an eye on the 50-day SMA (currently 7,827) as the next area of support in the even that selling picks up again next week:

S&P 500 Index ($SPX): After getting as low as 2,864 earlier in the session the SPX has reversed course and is now higher by 5 points to 2,883 (a +0.75% reversal). It appears that the SPX is finding support at its 20-day SMA where it has done so multiple times over the past month:

How the market finished last week, the S&P 500 down 1.0%, the Nasdaq down 2.6%, and the Dow down 0.2%.

This Week: September’s bearish reputation appears to be holding up thus far and I’d suggest maintaining a cautious stance as we head into next week given continued trade uncertainty, emerging market weakness and rising rates.      

Friday’s session got hit with a late-morning sell-off which was triggered by additional tariff threats from President Trump. President Trump announced when boarding Air Force One said that the previously announced $200B in Chinese tariffs “will take place very soon depending on what happens” and added, “I hate to do this, but behind that there is another $267B ready to go on short notice if I want”.

After Trump’s comment the markets immediately responded negatively with a sell-off. The current set-up favors the bears for a number of reasons – seasonally we are in the worst performing month of the year; trade tensions are heating up rather than moving towards resolution; emerging markets are trading near 52-week lows (largely due to trade and U.S. Dollar strength) and rates are pushing higher as we move into a FOMC meeting later this month (Sep 25-26^th). Markets typically don’t respond well to this level of uncertainty and therefore the outlook for next week may be volatile with a bearish-bias.

Economic Calendar: Consumer Credit (9/10), Producer Price Index (9/12), Consumer Price Index (9/13), Retail Sales (9/14)

Some of the major earnings announcements on deck: ADBE, KR, PLAY, BRC, SONO.

$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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