Market Direction: BULLISH alert issued 10/24/2019
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Market Direction Week Review: The
Senate impeachment hearings continued this week. Democrats argued many of the
same points that have been made previously, while Republicans continued to
rebuff their claims and support President Trump. Democrats argued for the
ability to call new witnesses and introduce new documents, while President
Trump’s legal team pushed back citing the Democrats’ weak case. Equities for
the most part have continued to ignore the issue as not relevant to the economy
or the financial markets.
Separately,
as trade experts dug into the details of the US/China phase 1 trade agreement,
some troubling concerns have surfaced. As I discussed here last week, at the
center of the agreement is a commitment by China to purchase $200B more in US
goods and services, including more than $30B in agricultural products, though a
clear mechanism for ensuring compliance does not exist. To meet the targets,
China would need to increase US imports by over 90% from 2017 levels, and the
US would need to boost total exports by as much as 18%; both substantial
increases that might be impossible for either side to meet. Further, the
agreement does nothing to prevent China from reducing existing import levels on
about $51B in goods not covered in the agreement, and replacing them with new
goods that are. Interestingly enough, none of this will matter until early
2021, as that is apparently when the first data on 2020 trade with China
becomes available.
The
top news item this week in Asia, was the announcement that the newly discovered
respiratory coronavirus has been spreading faster than expected. At the time of
this writing, the Chinese cities of Wuhan (where the virus was first
discovered), Huanggang, Ezhou and Chiba are all in lockdown and public
transportation has been suspended in several other cities, as markets try to
gauge the potential global threat to airlines, retailers and other businesses.
More than 900 cases of the illness have been confirmed in China, including 25
deaths, and travel restrictions are currently impacting more than 40M citizens.
A small number of additional cases have been confirmed in Thailand, South
Korea, Vietnam and Singapore, and at least 2 American travelers to the affected
province contracted the virus and returned to the US. The World Health
Organizations (WHO) has not yet declared a global emergency, but the story is
changing by the hour as new data comes in. While it’s certainly too early to
forecast the longer-term impact, historically world pandemics have not had a
significant or lasting impact on the US economy. However, this does bear
watching in the coming days.
The
annual World Economic Forum began in Davos Switzerland this week, and as usual
there was plenty of sparring among attendees. Treasury Secretary Steven Mnuchin
traded barbs with Swedish activist Greta Thunberg over climate change,
President Trump, newly emboldened by the phase 1 agreement with China,
threatened European Union (EU) members on trade and tariffs relating to digital
services and automobiles, and most attendees struggled to contain their envy of
the state of the US economy. There has also been plenty of discussion regarding
the usual topics of NATO, global trade, Brexit, energy, debt, interest rates,
and containing the new Chinese coronavirus.
Market Direction This Week: We track the stock
market based on our Bullish and Bearish Alerts a new Bullish Alert
recently started on 10/24/19 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).
It’s still early in Q4 earnings season. With just 86 companies (17%) of the S&P 500 reporting, EPS beat 73% and Rev beat 66%.
It’s still early in Q4 earnings season. With just 86 companies (17%) of the S&P 500 reporting, EPS beat 73% and Rev beat 66%.
“If
this trend continues, Q4 earnings growth should finish closer to 2% (vs -1.5%
currently). Q4 earnings season really picks up steam over the next week, and we
are interested to hear from certain sectors and stocks. For example, Technology
has seen 23% P/E expansion since the end of September; and while earnings
estimate revisions have been very stable, it will be important for these
companies to meet (or exceed) expectations in order to sustain their price
momentum.”
The
Federal Reserve gathers in Tuesday to kick off its first two-day meeting of the
year. At the conclusion of the meeting, Fed Chairman Jerome Powell will hold a
press conference. Consensus expectations are for the Fed to hold the federal
funds target range steady between 1.50% to 1.75% following this month’s
meeting.
Investors
will get the first look at the U.S. fourth-quarter gross domestic product
(GDP). Economists surveyed by Bloomberg expect the U.S. economy to have grown
2.2% during the quarter, up from 2.1% growth in the third quarter.
“A slowdown
in consumption and government spending should be offset by a small pickup in
business and residential investment. Trade and inventories will continue to be
volatile with a large contribution from net exports partially offset by a drag
from inventories,” Credit Suisse economists explain in a note Jan. 23.
“Consumer spending should slow to a moderate pace of 1.9% after growing solidly
by 3.1% in Q3. Labor income has slowed amid sideways consumer sentiment,
suggesting a trend slowdown in consumption is likely.”
Economic Calendar: Durable Goods (1/28), FOMC Rate Decision (1/29), GDP (1/30), Chicago PMI (1/31)Some of the major earnings announcements on deck: MSFT, AAPL, FB, AMZN, V.
$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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