Good Monday morning and welcome back to the land of blinking screens. Global growth, the Trump/Russia situation, oil, the upcoming Fed meeting, and the greenback are in focus to start the week.
On the growth front, the euro area Markit PMI fell to 55.8 in July, which is the weakest reading in six months. Next up, the IMF contends that the world will rely less on the United States to drive global growth in the coming years, cut its forecast for U.K. growth, and increased growth estimates for Japan and the euro area.
Next up, major oil producing countries are meeting in Russia and so far at least, there are no major changes/announcements relating to supply anticipated.
As for the Fed, Janet Yellen's merry band of bankers meets again this week. While just about everybody agrees that the Yellen & Co. won't take any action, the meeting, as usual, will be all about the post-meeting statement versus market expectations. Markets are looking for the Fed to officially embrace the stance Yellen took in her recent Congressional testimony.
Finally, since it's the start of a new week, let's get to our objective review the key market models and indicators and see where things stand. To review, the primary goal of this weekly exercise is to remove any subjective notions I might have in an effort to stay in line with what "is" happening in the markets.
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.
View Trend Indicator Board Online
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...
View Momentum Indicator Board Online
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.
View Early Warning Indicator Board Online
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.
View External Factors Indicator Board Online
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.
View My Favorite Market Models Online
With the S&P and Dow making new highs last week, it is not surprising to see a lot of green on the indicator boards. And while there are some things to be concerned about - such as the projection of the cycle composite, the level of investor complacency, the overbought condition, and the lack of economic "oomph," the bottom line is this is a bull market until proven otherwise and our heroes in horns should be given the benefit of the doubt here. Experience has taught me that bull markets can last longer than almost anyone can imagine and go higher than most bears can withstand. So, as long as rates are low, the economy is growing, inflation is tame, and earnings are improving, stocks can be bought. My only caveats are to remember that typically stocks don't move in a straight line and that this is NOT a low-risk environment. So, while I'm happy to remain on the bull train, I will continue to keep an eye on where the nearest exits are located.
Thought For The Day:
Always do right. This will gratify some people and astonish the rest. - 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 the U.S. Economic Growth (Fast enough to justify valuations?)
2. The State of Earnings Growth
3. The State of Trump Administration Policies
4. The State of the Fed
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.
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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.
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