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Weekly Market Recap Apr 15, 2018

Courtesy of Blain.

One thing technicals cannot account for are news events, and Tuesday’s relaxation of fears about #TRADEWARS(tm) due to a speech in China drove indexes to a very nice rally that day.  That said we’ve stated that fear has been a bit overblown and emotional as we are in the bluster and trial balloon stage.

Monday, Trump tweeted “China will take down its Trade Barriers because it is the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property.”  Tuesday, Chinese President Xi Jinping made a speech touting plans to give foreign companies greater access to financial and manufacturing sectors. He also talked about a cut in tariffs on car imports and an improvement in protection of intellectual property, among other measures.

“It was a short-term surprise to the risk markets that Xi put out a positive comment saying he’s open to trade negotiations and relaxing trade restrictions. This is going to be an ongoing issue for months, but for today it’s a shot of adrenaline,” said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors.

All that said, more #TRADEWARS(tm) hand waving could be coming as it was reported late in the week the White House plans to step up pressure on China to make trade concessions, via a plan for fresh tariffs and a threat to block Chinese technology investments in the U.S. Details of which Chinese products are on the hit-list of $100 billion in tariffs could be revealed as soon as next week.

For the week the S&P 500 gained 2% and the NASDAQ 2.8%.

Crude oil rallied through the week, hitting the highest levels since late 2014 as the tensions in the Middle East fed concerns over potential supply disruptions in the region.

“With the U.S. oil production set to rise further in the coming months, the global oil market will likely remain amply supplied in the long-term. We therefore think that oil prices will struggle to rise significantly further, although in the short-term price spikes are possible given the heightened possibility of military action in Syria,” Razaqzada wrote.

On the economic front, the consumer-price index fell 0.1% in March, while the core CPI—which excludes food and energy—was up 0.2%. Both readings were in line with analyst forecasts.

The minutes from the Federal Reserve’s latest policy meeting show that policy makers discussed the need to tap on the brakes on the economy.

Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski.

Also from Jill, the # of >1% move days on the S&P 500 in 3.5 months is already nearly at levels seen for entire years such as 2013 and 2014.  And you can see just how BORING and unusual 2017 was.

Zillow is getting into the house flipping business!

Trillion dollar deficits are soon here again — but this time during an expansionary period.   And they soon look to be a permanent thing – the real interest now is when the next recession comes and it’s time to “stimulate the economy” is if we can see a $2 trillion deficit.  But no worries – tax cuts pay for themselves!

The Congressional Budget Office on Monday forecast a rising tide of red ink in the coming years, saying that trillion-dollar deficits will return in 2020 in its first report since President Donald Trump signed last year’s tax cut and this year’s big spending bill. The CBO said the budget deficit would be $804 billion for the current fiscal year, which ends Sept. 30, well above the $665 billion shortfall the government notched at the end of fiscal 2017.

The U.S. hasn’t run deficits exceeding a trillion dollars since 2012. From 2009 to 2012, deficits were above $1 trillion as the government grappled with the recession and a financial crisis.  Debt held by the public will rise from 78% of the economy at the end of 2018 to 96% by 2028, the report estimated, and said that would increase the likelihood of a fiscal crisis.

The week ahead…

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.  More #TRADEWARS(tm) and political intrigue.  Retail sales for March will be reported Tuesday.

Index charts:

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.

The Russell 2000 is back over its 50 day moving average.

The NYSE McClellan Oscillator was positive this week so a feather in cap for the bulls, but it’s not aggressively above 0.

Long term: Still very positive for the “buy and never sell” crowd.

Charts of interest / Big Movers:

Monday, in the biotech lottery AveXIs (AVXS) surged 82% after Novartis (NVS)said it would acquire the clinical-stage gene therapy group for $8.7 billion in cash, or $218 per share.

Verifone Systems (PAY) surged 52% Tuesday after the payment and business services provider said it has agreed to a $3.4 billion private-equity acquisition by a group led by Francisco Partners.

Also Tuesday, Sprint (S) surged 17% after The Wall Street Journal reported that the telecommunications company had restarted merger talks with T-Mobile about five months after previous deal talks were abandoned.

Thursday, Bed Bath & Beyond (BBBY) tumbled 20% after the home-goods retailer late Wednesday guided earnings for fiscal 2018 below forecasts.

Enterprise software company Zuora (ZUO) spiked 43% in its trading debut.  Five things to know about Zuora.

Have a great week and we’ll see you back here Sunday!

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