The heartburn continues. Ok, maybe it’s now acid reflux. Markets had another terrible week. The key question is: are we close to a bottom, or is there more to come?
Late last week I wrote my clients an email discussing the current correction. I sought to answer several questions.
First, are we looking at another 2008? Short answer: No. Back then we were dealing with the sub-prime mess. That led to an international banking crisis and almost meltdown. The big banks are solid, and have passed the new Fed stress tests. Our current economy is doing well, and looks to get even better.
I’ve listened to a lot (a lot) of financial television over the last two weeks. I’ve heard the experts point to the 10-year, oil prices, fear of inflation, increases in Fed interest rates, and more. The reality… no one really knows what triggered this correction. And they don’t know what will stop it.
That said, the Market bounced off of a key level of support Friday afternoon: the 200-day moving average. Yes, intraday on Friday it penetrated that average. But the Market finished strong in the final 30 minutes of trading, well above that key point.
Second, what does my model say? A partial move out of the markets and into an inverse trade could happen soon if the correction continues. But not yet. This next week will be really important.
The international trade gap widened in December. The trade deficit was just over $53 Billion.
The ISM Non-Manufacturing Index came in stronger than expected. The consensus was for a 56 number, but came in just shy of 60. This result is one of the best in several decades. Simply put, it’s another indicator showing the economy is doing well.
The economic focus of the week: How will markets respond this week? Have we hit a bottom or is there more to come? Yes, we get a few important indicators like the latest retail sales, but the market direction will be the focus all week.
Companies reporting this week: Avon, Campbell Soup, CBS, Cedar Fair, Cisco, Coca-Cola, Deere, Denny’s, Diebold, Fannie Mae, Heineken, Hyatt, Kraft-Heinz, Lincoln Electric, Marathon Oil, Marriott, Molson Coors, Pepsi, Smucker, and Under Armour.
Indicator focus: January’s consumer price index and retail sales (Wed); February’s Philly Fed survey and Empire State survey, January’s produced price index and industrial production (Thu); and January’s housing starts (Fri).
Have a great week,
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