Surging higher led by Financials and rebounds in laggards (that we like in this case) like AT&T (T), you have the market up Wednesday and rotating higher. By Thursday, the energy sector and McDonald’s (MCD) took over after tech weakened, writes Gene Inger.
In one sense it’s on a tether attached to a building flagpole (technically) that has yet to peak and form a sort of pennant formation.
There is no rationale that suddenly popped-up, as the revival is basically technical especially when it is seen in the face of higher rates. Technically risk builds toward reversal.
Reuters: Tech rally loses steam Thursday. McDonald's, energy shares push Dow higher.
We are skeptical of this market. See the rotation (welcome it actually) with a realization that much must fall in line for this to extend.
Stay tuned as we are not short this market, but sure would not chase it, having been buyers in an enthusiastic confident way immediately upon the election. That play is not exactly new and many sectors are still shy of the early year highs.
A pennant may loom ahead but isn’t essential. As we’re overbought amid awaiting three central bank meetings as well as a North Korean Summit.
It’s a market that can work higher and then go sideways with trepidations ahead of all those events next week, while also being sensitive to surprise or exogenous events. None are gleaned by this market for now.
In that realm, neither the mixed chatter about Canada, nor the firmer credit markets given some improvement in the deficit picture (hence higher GDP estimates from a couple economists), have weighed on the equity market.
Statements of forthcoming conversation between both Canada’s Trudeau and France’s Macron didn't move markets either. Neither did Kudlow’s remark about how serious Trump is about tackling the trade picture.
In reality he’s already tackled it; and the United States remains planted in the Catbird Seat with these discussions.
In-sum: Trade policy improvements benefit Americans of both parties. In a sense it takes a maverick like Trump to get this going; even if so much has ingratiated him on some fronts. Reducing barriers overall while enhancing incentives to move jobs to the USA are beneficial to most Americans. We are not getting a fair shake, and on the agriculture side it’s a challenge. While not simple, it has to be tackled. And should have been decades ago.
Recorded at MoneyShow Las Vegas May 14, 2018
Duration: 4:10.
