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Wall Street’s Best Investments 806

We were having a pretty good month on the Dow Jones Industrial Average, until the trade tariffs issue raised its ugly head again. That consternation has driven the markets back to their month-ago trading levels—after a 1,000 point or so gain. While short-term trading is volatile again, most market insiders remain very bullish, as you’ll see in our Advisor Sentiment Barometer and in our Market View.

Wall Street’s Best Investments 806

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Market Views

Looking for Higher Prices

The most positive thing one can say about the $SPX chart is that the major downtrend lines have been broken, and the gap at 2750 has been filled. Beyond that, the bulls have had to be satisfied with small gains but a failure to penetrate through the resistance at the March highs of 2800. A close above 2800 would be constructive for $SPX, and that should lead to an attempt to make new highs above 2870.

Equity-only put-call ratios remain solidly on buy signals. They are in the lower regions of their charts, so they are getting into overbought territory.

Market breadth has been pretty much steadily positive. As a result, the breadth oscillators remain on buy signals, and they are modestly overbought.

Volatility remains one of the most bullish indicators. Meanwhile, $VIX remains stagnant—trading sideways to down and staying below 15. That is bullish fodder for stocks as well.

All in all, things are bullish. All of the indicators are on buy signals, and the $SPX chart is no longer bearish (I can’t really say it’s all that bullish until it at least rises above 2800). So for now, we are looking for higher prices. Should sell signals develop, we would act on them, but we are not going to anticipate them.
Lawrence G. McMillan, The Option Strategist,www.optionstrategist.com, 973-328-1303, June 15, 2018

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Still Bullish for the Long-Term

The US Indices edged lower on Friday, unwinding from recent rallies. Consumer Staples form short term price and relative bases.

Our outlook remains cautious, but we maintain our modest net long. Indices begin to stall at the top of their ranges, or new highs.
John Gray, Investors Intelligence, www.investorsintelligence.com, 914-632-0422, June 18, 2018

Don’t Give up on Financials

Now is NOT the time to give up on Financials. Since the initial flattening to 60bp on 11/21/17, Info Tech has significantly outperformed the SPX, Industrials are roughly in line, but the Financials have disappointed – especially as the UST curve has flattened to below 40bp. Although many fear the Financial sector may underperform as the 2-10 UST yield curve flattens even further, the history of the past two cycles suggests otherwise.

This productivity trade sector bottoms in relative performance when the curve is around current levels (35bp), and then shows significant relative outperformance until the initial inversion of the curve (Figures 2-3).
Tony Dwyer and Michael Welch, Canaccord Genuity Research, www.canaccordgenuity.com, June 18, 2018


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THE NEXT Wall Street’s Best Investments will be published July 18, 2018
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