Good morning and Happy Wednesday. I've gotta hop to an early meeting so I'll keep this brief. Traders are watching oil and commodities in the early going today as well as sifting through the commentary on what to expect from Janet Yellen's speech in Jackson Hole, which is scheduled for Friday morning at 10:00am.
On the oil front, while crude is not the focal point it was early in the year, the price of oil remains a focal point. There are two reports putting pressure on crude this morning. First was the data from the American Petroleum Institute showing that stockpiles of crude unexpectedly rose last week in the U.S. Next, there is word that Iran may not attend next month's OPEC meeting in Algiers. And then there is the worry that an output cut by OPEC wouldn't actually help the cartel as much as other producers (think U.S.).
Concerns about oil are also spilling over into the macro theme. The thinking is that any further decline in crude prices will trigger worries about global growth. On this subject, the bears point to the price of copper, which fell again overnight and is currently at risk of giving up all of the gains seen in 2016.
However, make no mistake about it; the big focus in the market continues to be the Fed and Ms. Yellen's speech on Friday.
This morning another Fed Governor has weighed in as Dallas Fed President Robert Kaplan said it is appropriate for the U.S. central bank to remove some of the policy accommodation and move towards a more neutral stance. In English, this means its time to start returning rates back to more normal levels. Kaplan joins Vice Chair Stanley Fischer and NY Fed President William Dudley on the list of Fed officials supporting rate hikes in the near-term. So, again, all eyes will be on Janet Yellen Friday and the bottom line is stocks may continue to waffle into the event.
From a technical standpoint, I've been writing for some time now about the idea that a new bull market began in February. This morning, I've drawn in the appropriate trendlines on the chart to illustrate this point. While we tend to focus our attention on the near-term action, sometimes it is just as important to take a step back and look at the bigger picutre. And from my seat, once we get the near-term negative seasonality out of the way, there are far more reasons to be bullish than bearish.
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Publishing Note: I am traveling the rest of this week with a couple very early meetings. Thus, reports will be published as my schedule permits.
Current Market Drivers
We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).
1. The State of Global Central Bank Policies
2. The State of U.S. Economic Growth
3. The State of Oil Prices
Thought For The Day:
"The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails." -- William Arthur Ward
Wishing you green screens and all the best for a great day,
David D. Moenning
Chief Investment Officer
Sowell Management Services
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