I update each Saturday with my view of the stock market for the next few weeks. The monthly “Long Term” update will be on a Wednesday soon after the 15th of each month, and this supports investors who want to buy and hold, but want to sell to avoid the bulk of a crash, and buy back in for most of the next bull market. You can always scroll down a few weeks and find the latest “Long Term” update.
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The monthly Long Term update was posted Wednesday and is just below this post.
A rash of estimates in the January 13 week clouds an unusually steep decline in initial jobless claims which fell 41,000 to 220,000 for the lowest showing in 45 years (last week was a little high, this week a little low, all noise so far to me). Consumer sentiment continues to edge down, to an index level of 94.4 for preliminary January in the softest showing in six months.
It was a light week for statistics, and the drop in consumer sentiment is in opposition to the general upbeat reaction in corporate America to the tax cuts. Watching for more information.
Surprising softness in the Russian economy:
“Jan. 18, 2018 – MOSCOW (Reuters) – Russia’s economy unexpectedly contracted in November, hit by a drop in industrial production, the economy ministry said on Monday.
Gross domestic product shrank 0.3 percent year on year in November, the economy ministry said, contrasting with analysts’ consensus call for a 1.5 percent growth.
Russia’s oil-dependent economy was on the mend in 2017 after two years of recession, triggered by a sharp drop in global commodity prices as well as sanctions imposed by Western countries against Moscow for its role in the Ukrainian crisis.
In November, GDP was dragged down by the industrial sector where output contracted 3.6 percent compared with a year ago.”
When the Russian economy falters they become more dangerous to cause turmoil in the world and provoke an incident. In this way, Putin can take the focus off of the internal incident and place the focus on an external foe. The Russian people will support their president if there is danger of a threat to the nation. If the Russian economy weakens more, watch out for an incident.
The S&P continued its rise to another record high close for the week. Earnings are coming in good, except for isolated cases like IBM and GE which are still weak. The large cap tech leaders have yet to release earnings, companies like AAPL, NFLX and GOOGL, and that has been sparking a rise in recent quarters.
Technically, the market remains overbought with the RSI (top of chart) up at 80 (70 is overbought). It remains extended well above the 50 day moving average. These would tend to invite some corrective activity. MACD (momentum, at the bottom of the chart) remains positive. The tax cut news and positive earnings are trumping (pardon the pun) the extended technicals at this time.
I sold about 25% of my SPY and a few individual stocks that I will look to buy back at lower levels.
It was a quiet week from a trading standpoint, but profitable from riding the market up.
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Rich Comeau, Rich Investing