Stock Market Outlook 04.16.2018

Stock Market Outlook 04.16.2018

Our weekly checkup/outlook is meant to give me a macro-view of the market. We tend to mostly ignore political talk and the potential effects on markets. Too much of it is empty prognostication. There are likely some ties, but typically too difficult to correlate market movement to political actions.

Instead, we look at what is happening on a weekly basis, with much attention given to current risk/reward ratios.

TradingView Technical Signals

Most index signals have returned to positive scores, with the exception of BOND.

Financials (VFH) are still somewhat weak, along with China Tech (CQQQ) and the BRIC index BKF.

Notably, VIX has dropped considerably, especially on a weekly basis.

market update trading view signals

Data via (Click here to get 30% off a Pro subscription.)
Scored as follows:
-2 = strong sell
-1 = sell
0 = neutral
1 = buy
2 = strong buy

Gannon’s Risk Insight

Old Prof believes little has changed from last week, with poor short term conditions. Long-term risk has risen over the last 2 weeks.

Short-term trading conditions remained poor this week. In mildly bearish conditions our trading approaches can still be profitable, but that might not be true for everyone. We continue to monitor the technical health measures on a daily basis. If this indicator goes to fullish bearish, we liquidate trading (not investment) positions. We are not quite at that point, but I have rounded the result to “5.” This is not a forecast that the market will decline. It indicates increased difficulty in trading profitably.

The long-term fundamentals and outlook are little changed. Based upon historical data for this indicator, I have increased the 9-month recession probability to the 18% range. I am monitoring, but not yet especially worried. The long-term technical health is 1.5, but I rounded it up.

StockTrader Take

StockTrader says conditions have improved and there’s a need to remain cautious.

Short term: Things look better than a week ago but some more work is needed over the intermediate term. The S&P 500 DID hold that 200 day moving average despite testing it quite a few times. That said breaking over 2800 would be a new “higher high” and would signal and all clear – that is quite a ways away. Also, breaking over the trendline connecting the 2 recent highs of January and March would be a needed first step.

Also of note on earnings season, which is expected to be strong:

Earnings season will begin in earnest with the next few weeks bringing most of the big hitters. Earnings season is expected to very strong – it will be interesting to see how companies guide up the rest of the year due to the tax cuts.

My take is that enterprise software companies will report especially strong earnings, gaining both from direct tax cuts, as well as other companies spending gains from tax cuts on implementing and improving software.

Other articles of notes

Sentiment Now Broadly Bearish:

In prior posts highlighting investor sentiment data it has been noted that sentiment data is more actionable at market bottoms than at market tops.

With much of the sentiment now decidedly bearish, just possibly the market is nearing a bottom.

Update: Predicting the next recession:

[CR April 2018 Update: This was written in 2013 – and my prediction for no “recession for a few years” was correct. This still seems correct today, so no recession in the immediate future (not in 2018). ]

Our Take

Market is volatile yet economy remains strong. Some concern over war but most political talk of late has been of little substance. Tradewars appear overblown, while tax law changes seem undervalued in many companies. Enterprise software companies remain a favorite. If things look week after earnings season, will need to re-evaluate.


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