The week that was…
The quite long in the tooth rally continues as we had 3 days of minor loses to begin the week; ending with 2 days of moderate gains. We are in a bit of a quiet zone as most S&P 500 companies have now reported earnings, the Federal Reserve is not a “worry” for about a month and a half, and the major economic news of the month hit the prior week. So the gnashing of teeth (or not) about government policy seems to be the main driver right now- late in the week it was announced some major new tax initiatives would be coming down the pike soon which the market liked.
President Donald Trump said Thursday that an announcement concerning taxes is on tap for the coming weeks, which his press secretary later said would involve an outline of a comprehensive tax plan. “Over the next two or three weeks,” Trump said during a meeting with airline executives, there will be an announcement that would be “phenomenal in terms of tax.”
“The market [is] trying to come to terms with whether the new administration and Congress will be able to work together effectively or not,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “Most of the positive expectations were based on the assumption that we were at the end of the gridlock era, and that the Trump administration and Republican Congress would work together.” Events of the recent week have called that notion into question and the possible repeal of Dodd-Frank is looking less likely, he added.
For the bears: The latest weekly survey of U.S. advisors by Investors Intelligence showed that the number of bulls rose to 62.7% last week, the highest level since December 2004. Investor Intelligence considers a number above 55% a danger zone, as it is a strong, contrarian warning of a potential market top.
Bespoke posted a nice chart on Tuesday showing that the S&P 500 has now gone 80 days without a 1% drop; the longest streak since 2006. So make that 83 days as of Friday!
Now even more jarring – this is the longest the market has gone without a 1% intraday move, since 1970!
Here is a 5 day “intraday” chart of the S&P 500 via Doug Short.
I am not sure how brands are valued exactly but if you believe this story, Google (GOOG) just passed Apple (AAPL) to regain the #1 “brand” for the first time in 6 years.
Brand value is more than just how much money companies are worth, according to the cost-estimating website. It also captures the abstract quality of how much confidence consumers have in the brand, as well as name recognition.
Here are the top 10 brands in the U.S.:
The week ahead…
Janet Yellen testifies Tuesday and Wednesday in front of Congress; retail sales are reported Wednesday (0.5% growth expected) … and not much else is out there on the radar that seemingly will move markets too strongly. Maybe if Trump attacks Yellen via Twitter we will get some fireworks.
Short term: The only negative here on the major indexes are that things are “extended”. Usually when price pulls away from a short term moving average it is difficult to continue that until the moving average catches up.
The Russell 2000 is at the top of this range in yellow – obviously a break to the upside would be positive.
The NYSE McClellan Oscillator has seen some dips below zero the past few weeks but nothing sustained. So there have been some minor head fakes but we are firmly above zero again.
Long term: Here are 5 year charts on the major indexes; again nothing negative here other than things are extended… in fact the NASDAQ has hit the upper part of our channel on a weekly basis!
Charts of interest:
Monday, Hasbro (HAS) shares surged 14% after reporting profit and sales above expectations.
Tuesday, Michael Kors (KORS) tumbled 11% after the apparel seller’s third-quarter revenue and fourth-quarter guidance both fell short of expectations.
Gilead Sciences (GILD) sank 8.6% Wednesday as Citigroup analysts cut the stock to neutral from buy after disappointing earnings late Tuesday.
Twitter (TWTR) closed down 12% Thursday after reporting a revenue miss and a user count that just beat forecasts. This has been a brutal stock for a long time and since buyout hopes went away last fall has been lifeless despite a big rally in the market.
Friday, Activision (ATVI) spiked 19% after the “Candy Crush Saga” maker announced a stock buyback and dividend hike late Thursday. But the games company’s quarterly results disappointed.
Also Friday, Sears Holdings (SHLD) soared 26% after the retailer reported fourth-quarter results and announced further details of its restructuring plan. That said, the rally only took the stock back to where it was 2 weeks ago!
Have a great week and we’ll see you back here Sunday!