Market Direction Week of November 18, 2019: FOMC Minutes Key

Market Direction: BULLISH alert issued 10/24/2019



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Market Direction Week Review: U.S. stocks reached another record high, rising for the sixth straight week -- the longest streak in two years. While trade negotiations remain fluid, the prospect of a limited-in-scope trade deal between the U.S. and China has been the key driver of the market rally over the past month. Global economic data remains mixed, with softer October retail sales and industrial production in China, but firmer-than-expected eurozone GDP. The global slump in manufacturing appears to be improving as the global manufacturing Purchasing Manager's Index has risen for three straight months, albeit from low levels. We believe underlying fundamentals could support further gains in stocks, but we don't expect the recent low volatility to persist indefinitely. 

U.S. equity markets opened up at record highs Friday morning following encouraging trade comments from White House economic adviser Larry Kudlow. Kudlow said that the two sides have been in discussions every day and that a trade deal is close, but “not done yet”. While trade remains an important issue for the markets, earnings have been respectable, the Fed has moved to the sidelines for now and the technicals have been emanating bullish signals. Toss in November/December’s bullish seasonality and you have a recipe for higher equity prices. 

There weren’t a lot of surprises out of Fed Chairman Jerome Powell’s speech before the U.S. House of Representatives, he essentially reiterated his message conveyed back on October’s FOMC meeting – U.S. growth remains steady, inflation remains below target and policy will remain data dependent. As it stands today, Bloomberg’s probability of a rate cut is a scant 1.7%, so it appears that the Fed will be taking a backseat to trade, at least for the remainder of the year.

How the market finished last week, the S&P 500 up 0.9%, the Nasdaq up 0.8%, and the Dow up 1.2%.

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Market Direction This Week: We track the stock market based on our Bullish and Bearish Alerts a new Bullish Alert recently started on 9/5/19 and we suggested to our followers they can trade any new long positions based on are model. We will continue to provide you the current stock market conditions as they develop. The current stock market environment is in an uptrend (see Market Direction Mid Week Update: Trading Strategies). 

Third quarter earnings are wrapping up and out of the 461 S&P 500 companies that have reported thus far, 58% have beaten estimates on the top line while 79% have beaten on the bottom line.

Investors will be monitoring the Federal Open Market Committee (FOMC) meeting minutes and retail earnings this week.

Though the minutes from the FOMC’s October policy meeting are unlikely to reveal new information on the central bank’s monetary policy path, it will provide color on the deliberations that resulted in the third consecutive rate cut this year. Furthermore, two voting members dissented the latest rate decision, and investors will be looking for further clues on the split committee.

“The October Fed minutes are mostly old news given the recent testimony from Chair Jerome Powell, but they should still provide a more detailed picture of how broad the support was for signaling an extended pause at the October meeting,” Capital Economics wrote in a note Friday.

Nomura pointed out that the minutes released on Wednesday will likely cover two FOMC meetings during the month — the policy setting meeting October 29-30 and the unscheduled meeting on October 4 when the committee discussed the balance sheet policy adjustments. “For the latter meeting, we expect the discussion to focus on how the Committee’s decision to commence expanding the balance sheet by buying T-bills does not represent a return to crisis-era quantitative easing policy.”

Economic Calendar: Building Permits (11/19), FOMC Minutes (11/20), Leading Indicators (11/21), University of Michigan Consumer Sentiment (11/22)

Some of the major earnings announcements on deck: HD, TGT, PAGS, ROST, BZUN.

$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. Building a community of investors one trade at a time. Share with a friend. Cha-ching!

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