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More Double-Digit Gains Are Ahead in 2018

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Posted by Edelson Institute

on Thursday, 21 December 2017 07:08

The economy is like a large ship in at least one way: Neither a ship nor the economy can turn on a dime.

It takes miles of clear blue ocean and time to safely turn a large ship. The same is true for the economy. It takes time for the economy to change direction.

That reality of slow change means 2018 looks like a good year for the U.S. economy. That’s because a key indicator is ending this year in an uptrend.

The Industrial Production Index Through Booms and Busts

Industrial production is rising, but it’s only been rising for about a year. In the past, uptrends in this indicator generally continued for at least five years. Its young trend bodes well for next year, as the trend is likely to continue.

The chart below shows the year-over-year percentage change in the Industrial Production Index (IPI) as the blue line. The S&P 500 index is the black line in the chart. Notice how trends in the two indexes tend to be in the same direction.

121817 2128 MoreDoubleD1



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Stocks & Equities

The Rude Awakening Of Slumbering Bulls

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Posted by Lance Roberts - Real Investment Advice

on Tuesday, 19 December 2017 06:24

Slumbering-BullsNear the end of each year, Barron’s magazine highlights the outlooks for the next year from 10, or so, Wall Street strategists. As noted recently by Sentiment Trader:

“Strategists are a little more optimistic than the Big Money was, forecasting a gain of around 7% for the S&P 500 in 2018. That’s about how much they thought the S&P would rally in 2017. And 2016. And pretty much every other year. When forecasting, it’s often a good bet just to go with the base rate – the average probability of being positive, or average gain in a random year. For stocks, that’s about a 7% nominal return, with about a 65% probability of showing a gain. Just stick with those, and you’ll have a better record than most. In aggregate, that’s what Wall Street does.”

Of course, 2017, has been a much better than the forecasted year as one of the great triumphs of the Fed’s liquidity-driven policy is that investor’s “animal spirits” finally returned to the investment markets. However, actual results, as Sentiment Trader showed, can vary.

” They overestimated the market’s 2008 return by 50% (!) and underestimated the 2012 return by 20%. Like most outlooks, forecasts, and research pieces, the biggest value isn’t necessarily in the bottom line, but in the thought processes and data used to get there. In those senses, reading through the outlooks can be a great exercise. Using them just for the bottom-line guess at next year’s S&P level is next to worthless as an indicator.”

But, with the ongoing massive global Central Bank interventions, as Michael Lebowitz discussed yesterday, it should not be surprising that as markets continue their seemingly unstoppable advance. That advance has ultimately triggered the “greed factor” as shown by surging investor confidence and expectations which have surged to historically high levels. (The chart below is a composite index of both the University of Michigan and Conference Board surveys.)



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Stocks & Equities

Emerging Markets: Best Gains in 8 Years

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Posted by Barry Ritholtz

on Friday, 15 December 2017 06:50

Emerging Markets Shrug Off Crises For Best Gains in Eight Years

eventful

 

Straight forward:

“2017 is set to go down as the year when easy monetary policy and budding global growth came together to deliver blockbuster returns for the world’s emerging markets. Currencies and stocks in developing economies are on track for their biggest rallies in eight years as even the riskiest markets shrugged off various crises and threats to deliver gains for investors.

Bonds, too, have had a good run, with local-currency emerging-market debt returning the most since 2012 amid the loose policy environment.”

EM are still below 2007 peak . . .

....read more HERE



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Stocks & Equities

Fed Takes Action, Stock Market Topping?

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Posted by Paul Rejczak - Sunshine Profits

on Thursday, 14 December 2017 06:20

Intraday trade: Our Wednesday's intraday trading outlook was bearish. It proved partly accurate because the S&P 500 lost 0.05% following higher opening of the trading session. The index extended its short-term uptrend, as it reached new record high. There have been no confirmed negative signals so far. However, we can see some short-term technical overbought conditions. Therefore, intraday short position is favored today. Stop-loss is at the level of 2,680 and potential profit target is at 2,640 (S&P 500 index).

Our intraday outlook is bearish again. Our short-term outlook is neutral, and our medium-term outlook is neutral:

Intraday outlook (next 24 hours): bearish
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral

The main U.S. stock market indexes were mixed between -0.05% and +0.3% on Wednesday, as investors reacted to the FOMC Rate Decision announcement. The S&P 500 index reached new record high of 2,671.88 (around 2 points above its Tuesday's record high) following interest rate hike release. The Dow Jones Industrial Average was relatively stronger than the broad stock market, as it gained 0.3%. It has reached new record high at the level of 24,666.02. The technology Nasdaq Composite gained 0.2% yesterday, remaining below its late November record high. The nearest important level of support of the S&P 500 index is at around 2,660, marked by recent daily lows. The next support level is at 2,650. The support level is also at 2,640, marked by last Friday's daily gap up of 2,640.99-2,644.10. On the other hand, resistance level is at around 2,670-2,675, marked by new all-time high. Will the S&P 500 index continue its uptrend? Or is this some topping pattern before medium-term downward correction? There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions along with negative technical divergences:

1

Close To Record High



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Technically Speaking: 2700 By Christmas?

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Posted by Lance Roberts - Real Investment Advice

on Tuesday, 12 December 2017 07:59

This past weekend, I discussed the current extension of the market. To wit: 

“In the short-term, the market trends are CLEARLY bullish, very overbought, but nonetheless bullish.”

SP500-Chart3-120817

“As such, our portfolios remain ‘long’ on the equity side of the ledger…for now. “

The current momentum behind the market advance is clearly bullish, and with the “smell of tax reform” in the air, there is little to derail the bulls before year-end.

As I previously wrote, I am still somewhat suspicious of the markets going into 2018. As I laid out over the last couple of weeks, I believe the risk of “tax-related” selling is a strong possibility at the beginning of the year as portfolios lock in gains without having to pay taxes until 2019. While the risk to the overall market trend remains small, a correction of 3-5% is possible. I am still looking for the right “setup” by the end of the month to add a small “short S&P 500” position to portfolios and increase longer-duration bond exposure to hedge off some of the potential risks.



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