Stocks on April 24, 2018: outlook


*These are my discretionary thoughts on the market. My Medium-Long Term model determines my trades. Go to the homepage for my latest market outlook. I update this webpage throughout the day.

Thoughts

  1. New Home Sales are still trending higher. A medium-long term bullish factor for the stock market.
  2. There is a positive correlation between oil and stocks right now. A short term bullish factor for the stock market.
  3. Citigroup Economic Surprise Index is falling. Not a medium-long term bearish factor for the stock market.

Read Study: why you shouldn’t sell in May and go away
4 pm: New Home Sales are still trending higher. A medium-long term bullish factor for the stock market.
New Home Sales went up from 667 to 694k. More importantly, New Home Sales are still trending higher. This is a medium-long term bullish sign for the stock market.
*New Home Sales tend to fall for 1-2 years BEFORE the equities bull market ends. We are watching out for signs of sustained deterioration in New Home Sales. There have been none so far.

1 am: There is a positive correlation between oil and stocks right now. A short term bullish factor for the stock market.
The S&P 500’s short term correlation with oil is now positive.

OPEC continues to push oil prices higher ahead of the planned Saudi Aramco IPO later this year (Saudi needs WTI oil to be above $70 to breakeven on oil). With oil rallying, this correlation is a short term bullish factor for the stock market.
Oil’s next resistance is in the $75-$80 range. This means that oil has some more room to rally in the short term, but it does not have a lot more room to rally in the long term.

1 am: Citigroup Economic Surprise Index is falling. Not a medium-long term bearish factor for the stock market.
The Citigroup Economic Surprise Index is falling right now, suggesting some very minor deterioration in the U.S. economic data.

This is not a medium-long term bearish factor for the stock market. As you can see, short term fluctuations in the economic data are normal – they happen every single year. The economy never goes up in a straight line. What matters is that the overall trend in the economic data continues to improve right now.
Read Stocks on April 23, 2018: outlook

Outlook

Here’s what I think will happen based on my discretionary outlook.

  1. The S&P has made a 6%+ “small correction”. This will not turn into a “significant correction”.
  2. 2018 will trend higher but also be a choppy year. There will be another correction later this year.
  3. Why I’m medium-long term bullish on the stock market from a discretionary point of view.
  4. The S&P 500 has approximately 1-2 years left in this bull market.

I do not use my discretionary outlook to place entry/exit trades. I am 100% long SSO (2x S&P 500 ETF) because my Medium-Long Term model does not foresee a significant correction at this point in time. I ignore small corrections. I only sidestep significant corrections and bear markets. So please take my short term thoughts with a grain of salt.
I have been long the S&P 500 since September 7, 2017 when it was at 2465.
*I also have a small Day Trading portfolio. Click here to view my day trades.

2 comments add yours

  1. Troy, I really like your daily outlooks as they are exactly what I would like to hear, being bullish right now. But – aren’t you bullish biased? You earmark all clear-cut negative signals (such as dropping Surprise Index today) as “not med-long-term bearish” – I wish you were right… but how impartial are you?

    • Hi Oskar,
      I’d like to think that I’m impartial. Look at the Economic Surprise Index. It dips every year. (Economic Surprise Index looks at whether the data is beating analysts’ expectations, not whether the data is trending higher or lower).
      So the point is, the data is starting to miss expectations, but is still trending higher.
      I’m going to write a post on this tomorrow. Probably titled “Considering the long term bearish case”.

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