by winston » Mon Aug 27, 2018 8:34 am
MONDAY
Consumer Confidence, second GDP read, Personal income and spending, Chicago PMI are up for next week. The Fed is also getting chatty though there is not much that will change here given Powell's Jackson Hole commentary.
Classic Fed miscalculation. Economic data has softened on the leading edge the past 3 weeks with regional PMI's missing, housing looking quite weak, Durables Orders dropping to 11 month lows (though business investment rose a nice 1.4%) -- perhaps just a soft patch, but the Fed is acting rather fatalistic in its need to hike rates.
It said it would give deference to the yield curve, but bonds are rallying as the Fed hikes and stock indices hit record highs. The Fed is making its same old mistakes: it sees an overall still strong economy, stocks still strong, and it ignores the yield curve.
When it cannot ignore the curve any longer, it starts making up reasons the yield curve doesn't mean anything this time. When more reasons bonds are 'wrong' are heard from the Fed, you know the Fed is going to overshoot. Okay, that is poor wording. We know the Fed ALWAYS overshoots; it is more a question of the timing.
With the stock indices hitting new highs, worrying about the Fed seems rather absurd. Near term it is. Nonetheless, you keep an eye on bonds as stocks rally, and as bonds and stocks rally you watch how the stronger stocks act.
Reversals from highs, breakdowns, etc. are indications. The market may still be attempting a top, new highs be damned. Don't assume the new highs are locked in. The action of SP400 and RUTX is encouraging as they hit highs, tested, and then put in additional gains. NASDAQ is still
problematic, however, and there is no guarantee it holds its new high.
As noted earlier, given the recovery by some big names and the new highs in SP500 and NASDAQ, the play is still mostly upside. The rotation stocks rallied, put in modest tests last week, and look ready to move again. If chips and techs want to play along the market has plenty of ammunition.
We are still looking at more AAPL and a GOOG position and will see what other NASDAQ and tech stocks want to come along to the upside. Of course the more industrial plays still have good looks and we will be ready to play those as they break back upside off their tests.
Source: Investment House
It's all about "how much you made when you were right" & "how little you lost when you were wrong"