Earnings Season Has Begun

04-16-18    Our April 9th target range of 26,600 – 26,800 has now been entered. Look for 26,800-900 as the next test. Earnings season has begun and stocks are responding. Geopolitics and legal action against Trump are the main hurdles currently. Cyber-security stocks continue to head to new highs – we continue to favor PFPT, FTNT PANW & a new smaller player FSCT (review our list at the bottom of the page).

04-14-18   Oil has remained high as expected awaiting Trump’s expected missile strike. Energy ETF’s –  XLE, XOP & VDE – have broken upwards with Oil just in the past week for the first time since December. We continue to like buying the dips into at least mid-May as Iranian talks heat up. Longer term overbought readings in Oil have arrived, but protracted corrections may be avoided until May/June. :  Below we display a chart of small investor sentiment that has performed well when reaching the current oversold condition for the stock market. While further price corrections are possible in the 2nd quarter, the downside is becoming more limited allowing for modest trading range buying entry points at recent lows or lower. 

04-11-18    Trump has signaled clearly that US will send missiles to strike Syria’s Assad very soon in retaliation for an alleged Government chemical gas attack on his people. Initially US stock fell sharply while Oil and precious metals rallied. A short term top in stocks and quick reversal down in energy and metals will follow after US air strikes and Russia’s potential retaliation. 

04-09-18    Huge news tonight on the Trade War front that will send stocks “sharply” higher. Just before 10PM EST April 9th – or 10AM April 10th in China – Reuters reports:  “President Xi  promised to open the country’s economy further and lower import tariffs on products including cars, raise the foreign ownership limit in the automobile sector ‘as soon as possible’ and push previously announced measures to open the financial sector.”  http://www.jpost.com/Breaking-News/Chinas-Xi-says-opening-brings-progress-closure-backwardness-549338 . The Dow has jumped 300 points on the initial comments and may quickly rally a further 500 points toward Dow 24,600 to 24,800.  Readers know we assumed Trump was playing poker to open up China’s unfair barriers to trade. This news came even faster than we expected and can only be construed as “very” positive news that had shaken the world markets. The inflection points of April 10th and 16th we talked of may now become upside surge dates. Downside ETF hedges should be reduced. We would not be expecting a resumption of the downtrend into a new correction low in April as long as Dow 24,000 holds as support.  

04-08-18  Friday (4-6-18) may be the first day of the 2018 correction where investors began to take the escalating Trade War threats seriously. The Dow fell 767 points intraday on Friday as the US & Chinese leaders said (1) China & the US claim they will keep escalating & not give in to demands (2)  there are no negotiations occurring to find a compromise solution  & (3) Trump is OK with a temporary decline in stocks near current levels or lower as long as his Bull market from election day in the 18,000’s is not at risk of being tested according to our interpretation of his remarks. News of a serious negotiation process between China & the US will be needed to put a floor in the market

04-02-18    After April 16th we expect basing action with potential upside trends as NKorea talks approach in May and Trump escalates threats against Iran. 

03-27-18   Stocks remain tethered to the roller-coaster news releases of escalation and de-escalation of a trade war with China. Our call for late March-early April retest or new lows in Dow/SP is approaching.  While geo-political poker mistakes may occur, we continue to favor Trump winning enough trade agreements within 2 months and pivoting to an aggressive focus on Iran by May.

03-22-18   Escalating Trade War fears and negative RSI momentum divergence helped trigger the forecasted March corrective action. We have been waiting for a test of the 11 to 15% correction zone before adding new money to equities. A more persistent trade action near the February lows is one of the missing elements to shift investor sentiment toward pessimism – hostile Trade talk will be the excuse. The German DAX and UK FTSE stock markets remain much weaker than the US which continues to be a negative that may require more sideways basing action in the weeks or even months ahead before new uptrends can renew. Psychology may require new lows and sustained lower price movement to actually shift Trump rhetoric. 

03-18-18   The main caveat remains that the initial 12% collapse into early February occurred without time for sentiment to turn negative causing traders/investors to Sell the rally. With Europe (led by Germany, France, Italy & Spain) along with Japan, China and Canada all downtrending near their correction lows, it warrants caution. Some deterioration before early April would be normal.  With the bigger picture still healthy, we would use any new legs testing the 11 to 15% correction level with oversold sentiment readings as new buying entries.

03-05-18    The end of February setback we have talked about the past 2 weeks arrived in a 5% collapse over 4 days mirroring the end of January/early Feb’ decline of 12%. Again we note the quick rebound from negative news: The theme of this correction is waiting for earnings to catch up to the price valuations. 

02-15-18      We may see another setback in stocks, but for now we are encouraged by the news response syndrome of stocks to inflationary data. The main psychological concern that remains is the lack of fear based selling by investors that didn’t have time to become pessimistic. The highest confidence buying waves in stocks begin “after” investor pessimism reaches a peak, when the selling energy is exhausted.

02-12-18       Stocks fell into a old chart forecast for February below the 10% correction level (13%).   Since November we have been talking of the first correction since 2016 beginning in January/February 2018 and we still feel this decline needs more time. As much as stocks panicked to the downside, it was too quick to scare investors out of their long positions – almost the identical psychology inverted, that occurred when Trump was elected and prices surged without a pullback to Buy.

02-05-18   This kind of correction isn’t unprecedented in a good economy as in 2011 when prices fell 18% in 2 weeks, but required 7 months to regain record highs. Total 2011 decline was 22% in the SP Index with a very healthy economy and less stock market over-exuberance than today. Current 2018 correction “intraday” has already hit the magnetic 10% level on the Dow. Look for an initial low this week.

02-03-18    For a couple of months we have discussed our forecast for the first real correction since Trump was elected is due during the 1st qtr’ 2018 earnings reporting period from late January to late February. Despite excellent earnings and economic growth, we expect a deeper dive into March 

01-23-18     We continue to view this period into mid-February as a higher risk time for earnings euphoria saturation.  A several month pause into the spring looks likely, especially if the 5% correction level is tested. VXX and SDS are basic hedging ETF vehicles 

01-15-18       This past year we have been very Bullish, especially through quarterly earnings seasons. Too many waiting for the ~5% correction to Buy. As we have said many times in recent months, whenever a 5% correction arrives, it means the market will likely dive deeper and longer to scare Buyers back to the sidelines. 

01-03-18    Strong seasonality in a very positive economic news environment in the US & Globally still bodes well for stocks in January. Corrections beyond 3% will increase in odds by March with potential for over 10% correction in the 1st half. Currently there are still too many looking for any pullback to Buy heavily. 2800 to 2900 S&P target is consensus for 2018.

11-14-17   Our current expectation remains that more serious corrections of 10% or more will hold off until the 1st quarter of 2018.  Tech stocks are among the most vulnerable in these declines.  2018 should mark a shift to commodity and financial stocks after a more serious market correction is completed in the 1st half of the year.

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Investors 90% Long – Traders 0%

Stocks we favor in 2018:    *=strong performance short term & long term:

AAPL   Apple  : *AMZN  Amazon :  ACN –Accenture :  ABT Abbott lab : ALGN Align tech :  *ADBE Adobe  :   BLD Topbuild : BA  Boeing  :   BOX  : BABA  Alibaba  COF  Capital One Fin’:  CBG  CBRE  Group : CLX – Clorox :  *CNC  Centene :  CRM Salesforece.com :  CFR Frost  : CONE Cyrus One : DBX Drop Box :  DXC Tech   : DWDP  Dow Dupont  :  EXAS  Exact Sciences  : *Forescout FSCT :  *Fortinet FTNT :  GPN  Global Payments :  GOOGL   Alphabet  : *HOME -At Home : IBM :  IDTI  Integrated Devices  :  ISRG Intuitive Surgical  MA  Mastercard   :  *MGPI  MGP Ingredients : *NOW – Service Now :  PNR – PentairPPG Industries :   *NTNX  Nutanix    :    *NEWR   New Relics   :   ON – On Semi  :  *PANW Palo Alto Networks :  *PYPL PayPal   : *OLLI  Ollies  PLD  Prologis  :   *PODD – Insulet    : *RHT RedHat  :  SBUX – Starbucks  : SPLK – Splunk :  *SPOT Spotify : *STZ Constellation Brands  :  SPLK – Splunk  : *Talend TLND  :  TTWO Take 2 Interactive  : TFX   Teleflex   : *TWLO Twilio :  UNH  United Healthcare  : UNP – Union Pacific  USCR   US Concrete  *V  Visa  :  VMW   VMWare  : WM -Waste Mgmt’  :  WDAY-Workday :  *WTFC Wintrust fin’   : *XPO Logistics : * ZBRA – Zebra Tech’  

US Indexes – ETF’s:  SPY  :  QQQ  :  XLK  :  IWR  : XLF   :  KRE  :  KOL : PEJ : DCT  Industrial Trust, *VNM

                  ::: Short hedges:=SDS (short for SPY) : QID (short for QQQ)

**SPOT Spotify is a new IPO we favor (added 4/5/18@144) as the clear leader in cloud music subscription models – an early innings version of Netflix & Amazon prime models.

VNM – an ETF for Vietnam has added strength from Chinese off-shoring avoidance of US tariffs along with continued Asian growth trends

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Disclaimer and Notice:  This report may contain information on investments that are high risk and have substantial risk of principal loss.  It is for informational purposes only. Statements in this communication are not statements of fact are merely opinions or forward looking statements from a potentially biased source(s) that involve known and unknown risks, uncertainties and other factors that could cause actual future results to differ materially from any prior or projected results. Statements in this communication may be inaccurate and/or unsuitable for you.  You must perform your own due diligence.  Your investment decisions should always be made based on your specific financial needs, suitability, objectives, goals, time horizon and risk tolerance.  Any decision is at your sole discretion and at your sole risk.  You are advised to consult with your individual investment and tax professionals before making any investment.  Past performance is no guarantee of future results.

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