Good Monday morning and welcome back. Although the ECB and FOMC Meetings are over and rates have been increased in the U.S., the Fed remains a focal in the markets due to the fact that we have a full calendar of Fed-speak on tap for this week. For example, at 8:00 a.m this morning, Federal Reserve Bank of New York President, William Dudley will speak, with Chicago Fed President Charles Evans scheduled to speak at 7:00 p.m. Then tomorrow, Vice Chairman Stanley Fischer, Boston Fed chief Eric Rosengren, and Dallas Fed President Robert Kaplan will all speak. And Governor Jerome Powell and St. Louis Fed President James Bullard are on the calendar later in the week. The questions that investors want more information on include (a) what the "unwind" plans for the Fed's balance sheet will look like and (b) if any FOMC members favor additional rate hikes in 2017.
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 message from the indicators boards this week continues to be one of an improving environment. While there were several "issues" with the big-picture conditions recently, some of these concerns now appear to be waning - especially in the area of rates and monetary policy. This does not mean however, that the market risk factors are now low. No, my take is that risk factors have come down a smidge and while still elevated, are not quite the concern they were a month ago. However, with the cycle composite calling for a meaningful decline to begin in mid-July, I think it is wise to remain alert at this time.
Thought For The Day:
Are you feeling inspired today? If not, shouldn't you be?
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.
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