Good Monday morning and welcome back. Hopefully, your computer doesn't make you WannaCry this morning as the global cyber attack has apparently infected more than 200,000 computers so far. Oil, North Korea, and European politics are also in focus this morning. A barrel of West Texas Intermediate crude was trading up more than a dollar in early trade Monday as the Saudi's and Russia publicly announced they favor extending production cuts into the first quarter of 2018. In the latest round of provocations, North Korea launched a new ballistic missile that can purportedly carry a nuclear warhead. And in Europe, Emmanuel Macron was sworn in as France's next President and Angela Merkel's party received a boost over the weekend, creating hope for stability in the region. On the markets front, stability seems to be the key word to start the day as there are no new political surprises out of Washington.
Since it's Monday, let's move on to an objective review the key market models and indicators. The primary goal of this exercise is to remove any subjective notions about the markets and ensure that we stay in line with what "is" happening in the market. 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.
Although the S&P continues to flirt with new highs and the trend of the NASDAQ is clearly up, my favorite, longer-term, big-picture models are not in their happy places at the present time. As such, I'm going to call this a potential key divergence. And while this type of condition can stay in place for a long period of time, it is worth noting that such conditions are also associated with aging bull markets. So, as I've been saying for some time now, I see risk factors as elevated.
Thought For The Day:
When things aren't adding up in your life, perhaps it's time to start subtracting...
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 Season
4. The State of World Politics
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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