After the NYSE McClellan Oscillator flipped back positive, we went out of our cautious stance and this week rewarded the bulls with significant gains Tuesday and Thursday. Only the guilty plea of Michael Flynn could slow down momentum, and even that was only an hour Friday morning before the bulls stampeded right back. With the tax reform plan looking very likely now, the market is rejoicing. The Dow Jones Industrial Average is now at it’s longest monthly win streak (8 in a row!) in 22 years. That said there was a bit of a hiccup in the NASDAQ Wednesday as mega cap stocks took a hit – apparently they can’t go straight to the moon forever.
Is that a potentially bearish “double top” in the Apple (AAPL) chart? Naaah – that would be a negative thing, and negative things aren’t allowed in the Trump market.
For the month the S&P 500 gained 2.8% while the NASDAQ jumped 2.2%. For the S&P 500 that is also 8 months of gains in a row; the last time that happened was the heady days of 2007 — right before the crash. But no worries. For the week the S&P 500 gained 1.5% while the NASDAQ slipped 0.6% on that mega cap tech stock weakness.
Frank Cappelleri, a technical strategist at Instinet LLC, said the tech rally was getting “long in the tooth ”with the NASDAQ 100 having gained for nine straight weeks, the longest since early 2012, and that the selloff should be viewed within the context of rotation out of large caps and growth stocks into financials, value and small cap shares.
Wonder if the Federal Reserve is scratching their head about creating a new bubble. On Monday, Dallas Fed President Robert Kaplan noted concerns about potential financial imbalances, observing that the stock market has now gone 12 months without a 3% decline. “This is extraordinarily unusual,” he said.
Jerome Powell, President Donald Trump’s pick to run the Federal Reserve, testified at a Senate confirmation hearing, giving investors their first big clue on how he hopes to operate at the Fed. His opening statement indicated he expects to stay on the course set by the current Fed chief, Janet Yellen.
The U.S. economy’s pace of growth in the third quarter was raised to 3.3% from 3% under the government’s latest revision to gross domestic product. The rise was in line with expectations.
This week in Bezos will own the world – Amazon is potentially looking to get into the prescription drug business.
There was a request from readers for some cryptocurrency coverage – Bitcoin rose from a snazzy $9720.74 to $11,336.80 this week… or nearly 17%. So there’s that.
There is also apparently some “mild volatility” intraday in these puppies.
A partial outage on digital currency exchanges such as Coinbase caused bitcoin prices to whipsaw on Wednesday, with the price of one bitcoin dropping $2,000 from above $11,000, then recovering to just under $10,000 by late afternoon.
Here is the 5 day weekly “intraday” chart of the S&P 500 … via Jill Mislinski.
More dire news about automation – but that’s going to be great for corporate profits as robots replace humans and their pesky healthcare and 401k demands. The last 33% of people in the country with money should be gaining 40% a year in markets as profits skyrocket!
“Major transitions lie ahead that could match or even exceed the scale of historical shifts out of agriculture and manufacturing,” the report read. “Our scenarios suggest that by 2030, 75 million to 375 million workers (3 to 14 percent of the global workforce) will need to switch occupational categories. Moreover, all workers will need to adapt, as their occupations evolve alongside increasingly capable machines.”
Last year, the White House’s annual economic report of the president (under President Barack Obama) forecast an 83% chance that automation will take a job with an hourly wage below $20, a 31% chance automation will take a job with an hourly wage between $20 and $40, and just a 4% chance automation will take a job with an hourly wage above $40. According to recent research cited by Vanguard’s economist, every industrial robot takes up to six jobs, with some six million jobs at risk of being lost to automation over the coming decade.
In the United States, McKinsey suggests that by 2030, 23% of current work activity hours could be automated. Meanwhile 39 million workers could be displaced, while 13% of the work force may need to switch occupational groups as automation takes over their current one. For China (in the midpoint scenario), 16% of work activity hours could be automated, while 118 million could be displaced. In Germany, 24% of hours could be automated, while 9 million workers are displaced.
[HEY I AM GOING TO PUT THIS IN VERY BIG TYPE SINCE IT’S KINDA SCARY]
Carl Benedikt Frey and Michael Osborne, professors at Oxford University, suggested that as early as 2022, 47% of U.S. jobs — which would translate to about 70 million people — could be automated.
Among other major economies, 69% of jobs in India and 77% of jobs in China could face the same fate.
But on the positive side, owners of stocks can make boffo money on the trend!
The week ahead…
The monthly employment report hits Friday (170L jobs and 4.1% unemployment rate expected) and tax reform looks to be in the bag – just a matter of what details the lobbyists will fight for the hardest. Other than that I guess at this stage of the Trump market it’s just guessing which index will rally the most next week! Boo yah!
Short term: The S&P 500 continued onward as the NASDAQ finally takes a small break.
The Russell 2000 has had a good 2 weeks as some form of tax reform seems guaranteed.
The NYSE McClellan Oscillator was positive for a 2nd week in a row.
Long term: Unicorns and rainbows continue.
Charts of interest / Big Movers:
Monday, Time (TIME) rose 9.5% in heavy trading after Meredith Corp, the publisher of Better Homes & Gardens and Allrecipes, struck a $1.85 billion deal to buy the magazine publisher.
Wednesday, Autodesk (ADSK) plunged 16% for the S&P 500’s biggest drop after the software company late Tuesday announced a restructuring plan along with its quarterly earnings.
Thursday, Barnes & Noble (BKS) tumbled 12% after the company reported a second-quarter loss that was wider than expected.
Have a great week and we’ll see you back here Sunday!