Early market indications are flat as we prepare for a busy week of news. Here are the major events that will impact trading this week:
1. Earnings from major stocks such as Netflix (NFLX) , Action Alerts PLUS holding Microsoft (MSFT) and IBM (IBM) will be reported this week. Expectations for good news is high reflecting the impact of a strong economy and the Trump tax cuts. Guidance will be key and there should be plenty of talk about the potential impact of tariffs and trade wars.
2. Pundits continue to warn about the impact of trade wars and tariffs on the market but the U.S. indices continue to ignore the most dire predictions. There are occasional flair-ups of concern but there seems to be a consistent hope that some positive breakthroughs will come and belied that it is dangerous to bet on a market meltdown due to these concerns
3. China continues to struggle as its economic growth slows and stocks hit multi-year lows. The problems there hint that it may be difficult for the Chinese to dig in on the trade war issues. There isn't any easing in the rhetoric but Asian markets in general are much more concerned about the trade issue than U.S. ones.
4. President Trump will meet with President Putin today. This will dominate the headlines but probably won't have much market impact. One of the main issues to watch for is an agreement on increasing oil supplies. Trump has been focused on bringing down oil prices recently, but has not had much success so far. He is likely to press Putin on this issue.
5. Bearish commentators continue to focus on political issues related to Trump as a potential catalyst but it is having no market impact. Any dips on political news have produced automatic buying action. With the Russian indictments last week there is some hope by the Trump supporters that maybe Robert Mueller is moving closer to wrapping up his investigation.
6. Federal Reserve Chair Jerome Powell is schedule to appear before Congress on Tuesday and Wednesday this week. He has recently indicated that low unemployment and rising inflation will likely result in at least a couple more rate hikes this year. The potential effect of trade wars also figures into the calculus and will be a topic much discussed at the hearing. Overall the Fed has been supportive of the market due to a generally upbeat tone about the level of economic growth.
Those are the main events likely to impact the market this week. Of course, our focus needs to stay on the price action. Market players are not embracing the negative narratives. There was one sharp dip last week when the Trump administration announced additional tariffs on China but that didn't last longer than a day.
Technically what we have to watch for are intraday reversals and weak closes. FAANG stocks have regained some leadership, which is key, but stock-picking isn't quite as robust as it was a few weeks ago due to weaker relative performance by small-caps.
Overall it remains a favorable market for bulls and with earnings news flowing this week there are likely to be some new trading opportunities developing.
I'm holding a fairly high level of cash as I've found fewer stocks to buy of late and have been flipping faster. Still, I'm a buyer and will be looking to put more cash to work as charts develop.