Monday, July 2, 2018

This Week's Message: Technicals Mixed, Fundamentals Strong, However.......

We'll make this week's main message short and sweet (or sour, given our take on recent developments) by sharing my weekend entry to our internal market log. There'll be much more to come herein over the next few days: 

7/1/18 (Sunday)

The intermediate-term technicals are breaking down in several of the cyclical sectors, as well as non-us markets, while showing some improvement in the defensive sectors. The "daily character" (very short-term view) of the charts, however, shows improvement almost across the board in the cyclical sectors (the exception is transportation), and non-us, while the defensive sectors (save for utilities), look suspect.

Longer-term technicals remain bullish across the board for the cyclical sectors, while the long-term technicals in foreign equities (save for Asia Pac) have become suspect. Among defensive sectors, utilities' long-term technical picture moved from bearish to neutral over the past week, healthcare fell from bullish to neutral, while staples and telecom remained bearish and REITs remained neutral.

The PWA index came in at +47.62 score (historically a strong reading), which means general conditions remain bullish, however, after three weekly declines, it's the lowest score of the year. 

The coming week is set up for more potentially huge volatility. Tariffs will become real both on imports (from China) and exports (to Canada, China and the EU). This ball is 100% in Trump's court.

Hugely important economic data next week:

Monday: PMI Manufacturing, ISM Manufacturing, Construction Spending
Tuesday: Factory orders
Wednesday: Holiday
Thursday: ADP jobs number, PMI Services, ISM Services
Friday: BLS Jobs number

The ISM and PMI surveys will be very telling. I strongly suspect that the respondents will be voicing major concerns over the trade situation. I'm especially looking for statements regarding tariff-induced inflation, and pending capex; I suspect some expansion plans have been placed on hold...

Have a nice week,

P.S. Attention Clients: In case you missed it, we sent you an email late last week soliciting a response regarding our upcoming change of custodians.

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