Good morning and welcome back to the land of blinking screens. The key to the markets in the early going on this fine Monday morning is the apparent easing of tensions with North Korea. For example, Central Intelligence Agency Director Mike Pompeo said over the weekend he'd seen "no intelligence" to indicate the U.S. was on the cusp of being attacked. National security adviser H. R. McMaster added, "we’re not closer to war than a week ago." As such, some of the "risk off" moves that had been put in play last week are being reviewed and stock futures point to a higher open on Wall Street.
Since it's the start of a new week, let's now focus on 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 one might have in an effort to 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.
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
This week saw the market internals weaken considerably in response to the increasing tensions with North Korea. In my opinion, the key takeaway is that market momentum was poor before the price action turned south. This tells me that the table was "set" for the bears if they could find a raison d'etre . The key question at this point is if this decline will reverse quickly - as all declines have recently - or will this become the meaningful pullback that the bears and the historical cycles have been calling for.
Publishing Note: The good news is my office is put together, I have internet, phones, and cable, and I there are only a couple boxes left to explore. The bad news is that completing the moving process may take longer than I anticipated and thus, morning reports may be sporadic this week.
Thought For The Day:
When you get to the end of your rope, tie a knot and hang on. -Franklin D. Roosevelt
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 North Korea situation
2. The State of the Economic/Earnings Growth (Fast enough to justify valuations?)
3. The State of Tax Reform
4. The State of Fed Policy
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.
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