Introduction

Trump announced via YouTube video that he would withdraw the US from the TPP on day one, the market yawned. What I'm wondering is who is cashing in on the Adsense revenue the millions of views the video is sure to generate. Anyway, he also laid out his agenda for the first 100 days which is a mightily toned down version of his campaign rhetoric. Among the items pledged are a look into infrastructure security, immigration violations and banning lobbying by government employees; all items he can address with the stroke of his pen. As for the TPP, Trump just wants to renegotiate and we already knew this. My view; the US trade deficit runs at well over a half trillion dollars per year, in the negative, that's equal to more than 1% of GDP, would it be so bad if some of that business stayed home?

International markets were basically calm. Asia managed to eek out some gains in the aftermath of another Japanese earthquake. Damage assessments are so far positive, the Fukishima reactor had some problems but no leaks, and investors breathed a sigh of relief. The Hange Seng led with gains near 1.5%, the Nikkei was a laggard with gains closer to 0.3%. European indices were buoyed by positive action in Asia and yesterday's new all time highs in the US markets. Gains were posted across the board but they were muted, perhaps due to the holiday week or just waiting to see what happens with tomorrow's data dump.

Market Statistics

Futures trading indicated a higher open all morning and there was little in the way of news or events to move the market. The broad market opened with small gains, about 0.5%, and held them for the first hour or so but there was little strength and no follow through on yesterday's new highs. By 10:30AM the indices were in retreat and they remained under pressure until nearly 12 noon. An intraday bottom was put in during the lunch hour, about -0.25% below yesterday's close for the SPX, after which a rally sent the indices back up to approach the earlier highs, which by the way, were new all time highs in and of themselves. By late afternoon the indices were setting new intraday and all time highs, which they held into the close of the session.

Economic Calendar

The Economy

Only one economic release today, Existing Home Sales, and it was a nice follow up to last week's wickedly strong housing starts and permits data. Existing homes sales increased by 2.0% month to month to an annualized rate of 5.60 million. This is the 2nd month of gains and 5.9% above this same period last year. Lawrence Yun, NAR economist, says this is a convincing autumn revival for the housing market. The bad news, or good news for current home owners, is that prices are up more than 6% year over year and expected to rise at least 3% in 2017 as labor market and wage pressure increase pressure on already tight housing markets.

There will be a massive data dump tomorrow because of the holiday, all the releases ordinarily scheduled for Thursday and Friday are getting released on Wednesday. The FOMC minutes and New Homes Sales top the list.

The Dollar Index

The Dollar Index fell in overnight trading to make its first test of bounce from support. The index opened the session with a loss near -0.4%, just above the $101.50 support target, and was able to move up from there after a quick dip lower. The index managed to regain all of today's losses and more intraday, closing with gains near 0.00%. Today's candle is bullish and consistent with backing-and-filling following a rally/during a consolidation as the market prepares to move higher. The indicators remain bullish and convergent with new highs, if also consistent with a consolidation, peak or pull back. Consolidation is likely to continue into the next two weeks up to and until, no surprise here, the FOMC meeting. The index may break out the week before, at the ECB meeting, but I think the FOMC meeting is a better target for now.


The Oil Index

Oil prices closed flat after a day spent drifting sideways. The OPEC hope has helped lift prices and for now is supporting them, this hope may evaporate quickly at any time if the deal, whatever it is and if it even exists, appears to be falling apart, does not meet expectations or in fact fails to come to fruition. Supply remains high, demand remains tepid, that may change next year when the economy is booming but for now is the reality of the situation. Another reality is that OPEC is pumping at record levels and would have to produce a cut more than double the one first proposed earlier this year in order to even match its effect. I remain skeptical to say the least.

Once again the oil sector has been lifted on faith in OPEC's reliability to reach a deal, and then follow through on it. Once again that faith has led to a test of resistance, and a confirmation of that resistance, for the Oil Index. This time it is at a slightly higher level than last, at the very upper reaches of the 8 month trading range rather than at the upper boundary of a narrower range within the range, and that test has been confirmed. The Oil Index gained nearly 0.5% and actually set a new almost 12 month high only to have bears step in and drive prices lower. The index subsequently lost nearly a full percent to confirm resistance at the 1,190 level. How strong this resistance is is yet to be determined, the indicators continue to gain strength although there is little to show that the index has broken out or will break out of its range. Longer term outlook for earning growth in the sector remains positive, even with $45 oil, so it is possible a bull market is brewing with or without an OPEC deal.


The Gold Index

Gold prices tried to rise on early weakness in the dollar but later gave up the gains. By end of day spot price was back to break even and trading near the recent lows. With the dollar on the rise and outlook for a rate hike so strong it is hard to see gold rising. Next downside target is $1,200, a break below here would be bearish and could lead to a much larger downward movement.

The gold miners continue to consolidate near recent lows. The Gold Miners ETF GDX lost roughly -1% in today's session but recovered the loss and basically traded sideways for the the 7th day in a row. The ETF appears to be making a bear flag within a three month down trend, below the 50% retracement line, and this signal is confirmed by weakness in stochastic. MACD is bearish but consistent with a trough, test of support etc; stochastic is showing weakness by trending lower and crossing the lower signal line. A move in price action below support at the $20 level would be bearish and lead to a possible down to $16.50.


In The News, Story Stocks and Earnings

Lots of food companies in the news today. First up, Hormel. The maker of SPAM and Dinty Moore Beef Stew reported earnings before the bell and served up a tasty treat. Earnings and revenue were a company record. Earnings were in line with expectations, revenue slightly above. Forward outlook is good, guidance was raised to a range above the consensus $1.68. Shares of the stock jumped more than 3% but met resistance at the short term moving average.


Campbell's Soup Company reported before the bell as well, delivering a can full of results. GAAP EPS jumped 52%, adjusted EPS up 5%, on slightly lower revenue (still better than expected) to $1.00 per share. The company CEO says they are off to a solid start relative to expectations and has reaffirmed guidance to a range with consensus as the mid point. Shares of the stock jumped more than 3.5% to test resistance at the $57.50 level. Today's candle is a long legged doji with strong indications of higher prices.


Hewlett Packard Enterprises reported after the bell and gave mixed results, as did Hewlett Packard Incorporated. Both arms of the once whole Hewlett Packard also gave weak next quarter guidance. Both companies fell in after hours trading but the HPQ chart is more interesting. Shares fell a little more than 1% and confirming a near term double top. Downside target is $14, with a possible move to $13.


The Indices

The indices are still drifting higher on election momentum and have once again set new all time highs, except for the transports. The transports were laggard in today's session, gaining only 0.16%, but were at least able to make another new long term high. The Dow Jones Transportation Average created a very small doji candle in a slow creep up toward testing a 2 year high. The indicators remain bullish and suggest upward drift could continue but momentum is waning. Resistance could spark a sell off and near term correction, longer term outlook remains positive. Should the index make more than a cursory pull back, if it pulls back at all, 8,600 is my target for strong support.


The broad market S&P 500 made the next smallest move, just over 0.22%. Today's candle is a small doji testing support at the previous all time high which was broken yesterday. The indicators are both bullish and support higher prices. MACD is holding steady at the high of the move, stochastic moving up to the very upper reaches of the upper signal zone, both consistent with steady inflows to the market. Next upside target is 2,250.


The NASDAQ Composite is runner up in today's lineup with a gain of 0.33%. The tech heavy index created a small spinning top type candle, the 8th in a row of candles in a near perfect 45 degree uptrend, and looks set to continue drifting higher into the near term. It is moving steadily higher from the short term moving average and is confirmed by both indicators, which are showing strength. Stochastic is crossing the upper signal line while MACD is building to a peak that will be the highest in nearly a year. Upside target is 5,500.


The Dow Jones Industrial Average made the largest gains today, a stout 0.35%, and is the most bullish looking of all the major indices. Today's candle extends the flag pattern break-out begun yesterday and suggest a movement of up to 1,000 is likely in the near term. The candle is small but white and bullish, it is the flag pattern break and continuation, as it is a continuation signal, that is important. The move leading up to the flag is roughly 1,000 points, this means the move following the flag will be roughly the same. Upside target is Dow 20,000.


The market is coming to a slow boil. It's been simmering on the back burner for a long time, about 2 years, and has yet to come to full boil but I think that is on the way. Today's action was light, volume wasn't heavy, but we made new highs, resistance is yet to be seen, signals are present in all the major index charts and outlook is good. I can't think of a single thing that, right now, could derail the rally, which means that something is out there lurking to try and do just that, but that is a worry. The reality is that the market is moving to new highs, earnings outlook is positive, economic outlook is positive and it's likely to stay that way into the long term. I remain cautious, but cautiously bullish and more bullish by the day. I'm letting my winners run for now, and waiting for the next dip to start getting serious.

Until then, remember the trend!

Thomas Hughes