*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.
- Big name investors aren’t worried about the trade war.
- The stock market’s breadth isn’t as bad as FANG makes it seem.
- Housing Starts made a new high. Medium-long term bullish for the stock market and economy.
Read [Update] Study: yield curve continues to flatten. A bullish sign for the stock market.
1 am: Big name investors aren’t worried about the trade war.
As I’ve said before, the trade war isn’t really much of a trade war because:
- The U.S. has the upper hand, and Trump is playing this to his advantage. China has a limited number of weapons to use in a trade war (from CNBC).
- This is most likely some more saber rattling, which will result in a deal in the coming months.
Some big name investors agree with this second point (from CNBC).
- Goldman’s CEO (Blankfein) thinks that Trump’s trade threats are a savvy negotiating strategy. And remember: Blankfein hates Trump, so he would have no reason to suck up to the President now. Blankfein is speaking his honest opinion.
- Paul Tudor Jones isn’t concerned about this. He sees it more as a “trade irritant” than a trade war. And remember: Paul Tudor Jones was one of the most bearish fund managers for the past decade, but now he has turned bullish. Jones isn’t some perma-bull who sees the positive in everything.
- And of course, Warren Buffett is optimistic that the trade dispute will end in a deal too.
1 am: The stock market’s breadth isn’t that bad.
You’ve probably heard this one a lot recently: “the stock market’s breadth is terrible – it’s all being driven up by a few high-flying tech and FANG stocks”.
That’s simply wrong. Breadth isn’t terrific, but neither is it bad. Breadth isn’t as bad as the bears make it seem.
The S&P 500 is a market cap weighted index. Hence, a few large stocks (e.g. FANG stocks) can have an outsized impact on the S&P. If breadth was “bad”, then the equal weighted version of the S&P should go up much less than the market cap weighted version of the S&P.
This isn’t the case right now. Both the market cap weighted S&P and equal weighted S&P are going up together.
Breadth isn’t a bearish concern right now.
1 am: Housing Starts made a new high. Medium-long term bullish for the stock market and economy.
Housing Starts just made a new high for this economic expansion.
The economy and stock market move in the same direction over the long run. Housing is a leading indicator for the U.S. economy. Hence, an improving Housing Starts is a medium-long term bullish sign for the U.S. economy and stock market.
This chart demonstrates how Housing Starts leads the S&P 500.
Read Stocks on June 18, 2018: outlook
Here’s what I think will happen based on my discretionary outlook.
- 2018 will trend higher but will also be a choppy year.
- 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.
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.