Wednesday, August 16, 2017

Market update: minutes from the July FOMC meeting (16 Aug 17)

  • The minutes from the July FOMC meeting showed increasing concern among several policymakers about softer than expected inflation readings. Despite the concern about slowing inflation, most Fed officials remain in favor of announcing a balance sheet move at the upcoming policy meeting. The FOMC will kick off its next two-day meeting on September 19.



Friday, August 4, 2017

Energy stocks seen getting help from lower dollar


The dollar’s retreat this year may lead to a rebound in U.S. energy stocks, according to Jim Paulsen, Leuthold Group Inc.’s chief investment strategist. Paulsen compared the U.S. Dollar Index, which fell 9.6 percent for the year through Wednesday, with the ratio between the S&P 500 Energy Index and the S&P 500 in a report Monday. The dividend-adjusted ratio dropped last week to its lowest level since January 2004. “Energy stocks could be market leaders again for a period” as long as the dollar declines further, he wrote.

Wednesday, July 26, 2017

Market update: FOMC announcement of no rate hike (26 July 2017)

July 26, 17:  2:00 PM FOMC Rate Decision

Fed says stimulus wind down to begin 'relatively soon,' leaves rates unchanged

  • The FOMC unanimously voted to keep the fed funds target range at 1.00%-1.25%. 
  • Regarding the central bank's $4.5 trillion balance sheet, the Fed indicated that it expects to begin the paring process "relatively soon", which has been largely interpreted as September. 
  • The CME FedWatch Tool now points to the March FOMC meeting (from December) as the most likely time for the next rate-hike announcement with an implied probability of 55.1%.

Tuesday, July 25, 2017

Market update: `New valuation range' indicated for U.S. stocks


“There are good reasons to suspect that a new valuation range may have evolved” for U.S. stocks, Jim Paulsen, Leuthold Group Inc.’s chief investment strategist, wrote in a report Monday. Paulsen highlighted an increase since the 1990s in the S&P 500 Index’s cyclically adjusted price-earnings ratio, based on average annual profit over 10 years. The shift reflects a less cyclical domestic economy, more stable inflation, a more growth-oriented stock market, a wider range of investors and the growing popularity of index funds, he wrote.

Friday, July 21, 2017

Market update: biotechs surge to new highs

Biotechnology stocks ($DJUSBT) are among the best performing stocks since the beginning of June with an approximate 16% gain over the past seven weeks. It's not unusual for biotechs to remain on a tear for an extended period of time so pullbacks should be considered for entry. The rising 20 day EMA is one such level to consider after a bout of selling as the weakness from late June into early July demonstrated.



 The group is in breakout mode again with signs pointing to higher prices ahead. However, the DJUSBT is overbought once again so consider an upcoming pullback to test the rising 20 day EMA, currently at 1876, to be a solid entry level. Price support near 1910 should also encourage buyers.

Friday, March 31, 2017

Market update (31 March 2017)

The major indices are doing extremely well.


Now let's discuss the five areas where we had warnings in 2007:

1. The weekly MACD could not be any stronger.  It has been rising with each price breakout, suggesting that momentum is accelerating, not weakening as it was in 2007.

2. There clearly have been no price violations.  If anything, the S&P 500 consolidated from 2014 to mid-2016, before breaking out in a big way post-Brexit, then again after the November U.S. presidential election.

3. The XLY:XLP ratio has been climbing nicely over the past year - much different than what we saw in 2007 - but we haven't cleared the 2015 relative high.  A breakout above that level would be extremely bullish.

4. Transports vs. utilities have also increased significantly since November, a good sign, but we haven't seen this ratio clear its early 2015 high and the ratio has been falling in 2017 thus far.

5. The RUT:SPX ratio has been declining since 2014, but it's very strong for the past year.

The absolute price action on major indices is very strong and relative price action continues to support a higher S&P 500 in 2017.  Breakouts on the above key relative ratios would add confirmation to this belief while deterioration in these ratios going forward would be warning flags to be confirmed by price breakdowns.