Quick Take: Geopolitics, Earnings, and Of Course, Trump Comments in Focus

Geopolitical issues, earnings, and, of course, Trump comments are in focus on this last trading day of the week. And so far at least, it looks like stock futures are pointing to another “sloppy” open at the corner of Broad and Wall.

On the geopolitical front, it looks to me like the combination of North Korea, Syria, and Russia has become enough for some traders to move toward a risk-off position. The latest is word that North Korea will conduct a nuclear test (its sixth) as early as Saturday and that the rogue nation has missiles that can carry sarin gas. Awesome.

On the Russian front, the country has vetoed a United Nations resolution to condemn the alleged chemical weapons attack by Syrian President Assad. Recall that Russia has supported Assad militarily and continues to deem the U.S. response as unjustified. Ugh.

Next, in case you missed it, it appears that Trump is trying to “jawbone” the dollar lower as the President told the Wall Street Journal yesterday that the greenback is too high.

In response, we are seeing the typical “risk off” trades gaining traction here with gold moving to a 5-month high, the dollar dropping, and the yield on the 10-year falling to 2.296, the lowest level seen since November 2016.

Turning to earnings, the quarterly parade of corporate reports is starting to move into high gear as we’ve got results from JPMorgan (JPM), Wells Fargo (WFC), and Citi (C) this morning. For those that are interested in the closely watched JPM earnings, Jamie Dimon’s bank beat the Street’s estimates on both the top and bottom lines. EPS came in at $1.65 versus $1.52 and revenue were reported at $25.586 billion versus $24.877.

As for Dimon’s economic outlook, the JPM CEO said in a statement, “U.S. consumers and businesses are healthy overall and with pro-growth initiatives and improving collaboration between government and business, the U.S. economy can continue to improve.”

I will be watching the action on the so-called “risk off” trades closely in the near-term as well as the key technical levels on the Dow and S&P 500, which so far at least are not really in play. However, with the current “sloppy” period getting long in the tooth, valuations at elevated levels, tax reform nowhere in sight, and several of our big-picture models waving warning flags, I think some caution might be warranted here.

Thought For The Day:

Never mistake motion for action. -Ernest Hemingway

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 geopolitical issues

      2. The State of the U.S. Economy

      3. The State of Trump Administration Policies

      4. The State of Global Central Bank Policies

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.


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The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

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