Good Monday morning and welcome back. We made it through the ECB meeting, the UK election, and Comey's eye-opening testimony last week and well, the major indices are none the worse for wear. Next up is this week's Fed announcement (where Yellen's gang is expected to raise rates another 25 basis points). In addition, there is the question if Friday's tech wreck will continue. From my seat, it appears that Goldman's "negative Nancy" view on tech sparked some much-needed profit taking in the big tech names. And while the selling could easily continue for a couple more days, let's keep in mind that end of quarter "window dressing" (which is technically illegal) tends to be a powerful thing. So, we would not at all be surprised to see some dip buying come in during what appears to be (well, so far at least) a garden variety pullback in the market's technology darlings.
Since it's the start of a new week, let's get right to our objective review the key market models and indicators. To review, the primary goal of this weekly exercise is to remove any subjective notions and ensure that we stay in line with what "is" happening in the markets. So, let's get started...
The State of the Trend
We start each week with a look at the "state of the trend." These indicators are designed to give us a feel for the overall health of the current short- and intermediate-term trend models.
The State of Internal Momentum
Next up are the momentum indicators, which are designed to tell us whether there is any "oomph" behind the current trend...
The State of the "Trade"
We also focus each week on the "early warning" board, which is designed to indicate when traders may start to "go the other way" -- for a trade.
The State of the Macro Picture
Now let's move on to the market's "external factors" - the indicators designed to tell us the state of the big-picture market drivers including monetary conditions, the economy, inflation, and valuations.
The State of the Big-Picture Market Models
Finally, let's review our favorite big-picture market models, which are designed to tell us which team is in control of the prevailing major trend.
The good news is we have seen some improvement in several of our key market models. For example, the Leading Indicators, State of the Tape, and External Factors Models are all back in the green this week. However, (1) all three big-picture models are only slightly in the positive zone (hence the "moderately positive" ratings) and (2) the "thrust" models have not triggered fresh buy signals during the current move. In addition, the news flow and the cycle composite seem favorable here. So, this combination tells me that while it is probably best to favor the bulls at this time, we are not in a "no brainer" uptrend. So, while I hate to sound like a broken record, this is not a low-risk environment and one should play the game accordingly. For me this means utilizing a "lower risk profile" approach and remaining alert for a change in the trend.
Thought For The Day:
"The secret of getting ahead is getting started." - Mark Twain.
Current Market Drivers
We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).
1. The State of Trump Administration Policies
2. The State of the U.S. Economy
3. The State of Earning Growth
Wishing you green screens and all the best for a great day,
David D. Moenning
Chief Investment Officer
Sowell Management Services
Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.
The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided "as is" without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.
Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
Advisory services are offered through Sowell Management Services.