Investors should pay attention to this ‘chart of the week, month and potentially year’

Commentary, News, Stocks

Critical information for the U.S. trading day

Another week, another set of records for the major U.S. indexes. Hey, this stock market stuff is easy, right? Sure, and it’s only going to get easier, apparently.

Now, “with the weight of a heavily handed Fed lifted,” the Macro Tourist’s Kevin Muir says, “stocks, and financial conditions, in general, will explode higher.”

Read: Fed’s tightening plans not definitively derailed by soft data

Muir, making his bullish case in our call of the day, says stocks will continue to dare the Federal Reserve to lift interest rates.

“Given that the market is now convinced the Fed’s on the sidelines, the last remaining potential bearish catalyst has suddenly evaporated,” he wrote, admitting he’s “not smart enough to know how the Fed will react” or how far stocks could rally from here.

But “this is a dangerous moment,” he said. For shorts, primarily.

Muir is contemplating a rather unorthodox approach to what he sees as an “inflection point” and ultimately a bullish “squeeze” play. He says that while the common belief is that volatility VIX, +4.10%  dips when markets rise, he is looking for a rally in both at the same time.

Or he might just load up on S&P SPX, +0.47%  long call options and wait for that market explosion.

Go ahead and throw in the potential for another quarter of stellar corporate earnings, and Muir’s call has to be looking pretty good at this point.

“The canary in the coal mine is earnings and the canary is singing a very sweet song right now,” says Karyn Cavanaugh, strategist at Voya Financial.

It looks like stocks are holding steady premarket.

Key market gauges

Futures for the Dow YMU7, +0.00%  and S&P ESU7, -0.01%  are little changed, while gold GCQ7, +0.49%  and crude CLQ7, -0.47%  are slightly in the green. China’s Shanghai Composite SHCOMP, -1.43%  finished down sharply but pared some losses amid worries about tighter monetary policy. Europe SXXP, -0.03%  is mixed.

See the Market Snapshot column for the latest action.

The chart

Oppenheimer’s Ari Wald calls this “our chart of the week, month and potentially year,” explaining that it “not only carries significance for the future direction of EEM’s trend — we think higher — but also for the cyclical recovery as well because broadening global participation remains a focal point to our outlook.”

As you can see, the iShares MSCI Emerging Markets ETF EEM, -0.46% , which has woefully underperformed the S&P 500 SPX, +0.47%  over the past decade, is breaking out of a 10-year downtrend and is also making a higher high relative to an MSCI global index.

The Reformed Broker blog’s Josh Brown also highlighted the chart in a post over the weekend, saying it has “the potential to become very big news for investors with global allocations and traders looking for the next mega-trend.”

The buzz

Tesla’s TSLA, -0.94%  Elon Musk sounded the alarm, once again on the looming threat posed by advances in artificial intelligence, telling a group of U.S. governors on Saturday that it’s “the biggest risk that we face as a civilization.”

Bitcoin BTCUSD, +5.28% , which once topped $3,000, dived below $1,900 over the weekend, but recently was back above $2,000. The broader cryptocurrency market’s value, also dragged down by a plunge for ethereum, at one point had been cut nearly in half, as you can see in the chart below.

Earnings

This looks to be a huge week of quarterly reports, following last week’s strong start that was led by some upbeat results from the financial sector. In total, we’ll get 68 of the S&P 500’s companies reporting, according to FactSet analyst John Butters. That includes numbers from Netflix NFLX, +1.14% , Goldman Sachs GS, -0.78% , Microsoft MSFT, +0.43%  and IBM IBM, -0.16% , to name a few.

The quote
Getty
A woman stands with a placard near the Houses of Parliament in London.

“When I know I’m going to get a better reception, I’ll come and not before” — President Donald Trump gave an ultimatum to British Prime Minister Theresa May, according to a report by the U.K.’s Sun tabloid.

The stat

36% — That’s what Trump’s approval rating over the first six months just plunged to, and it’s the lowest of any president. Ever. In the history of presidents. Of course, Trump’s response was exactly what you’d expect from him:

The economy

A report on housing starts is probably the release investors will focus most on this week, but it doesn’t hit until Wednesday. As for today, we’ll get fresh figures for the Empire State Manufacturing Survey at 8:30 a.m. Eastern.

Read: Manufacturing may help limit economic fallout from thrifty consumers.

Read this article in its original format at MarketWatch.com


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