A TIPSY Market

February 3, 2019

Weekly Market Outlook

By Keith Schneider

US Equity markets embraced a newly dovish Fed by tacking on a +1.5% weekly gain. US treasuries decided that it’s inflationary and backed off. Inflation adjusted bonds (TIPS) did well, attacking its 50-week moving average.

Meanwhile, other inflation plays such as gold miners (GDX), Oil (USO) Brazil (EWZ) all out performed key benchmark stock indexes this week.

On another note, Trump’s pressure on NATO members to pay their fair share of expenses is working as NATO is upping its spending by $100 billion over the next two years. However, Trumps pressure has resulted in some serious blowback.

NATO member’s spending won’t be with US defense contractors. Germany has decided not to buy US built fighters, opting for jets produced in Europe, costing US defense contractors billions of dollars.

Recent research shows that global confidence in a political leader directly impacts a countries GDP, as it effects global trade thru cooperation.  The data suggests for every 1% increase or decrease in approval abroad of a countries leadership, results in a .75 % increase/decrease in a countries GDP. Currently, outside of the US, Trump’s ratings have dropped significantly ( -18% or more), especially with our allies.

This week’s takeaways are:

  • The Dow Industrials broke above its 200-day moving average
  • Market internals have worked off overbought levels
  • Real Motion indicators/ momentum still have overhead resistance on weekly charts
  • Homebuilders (XHB) were buoyed by a dovish fed
  • Copper, Gold and Gold Miners are all acting like inflation is coming
  • Volatility ($VIX.X) is back at 200 day moving average and kissed the bottom of its Bollinger band
  • TIPS …. Inflation adjusted bonds closed at its 200-day moving average and looks poised for more gains
  • Growth is regaining strength led by Semiconductors (SMH) and Biotech (IBB) stocks
  • Emerging markets broke above 200 DMA with Brazil (EWZ) leading
  • The Dollar is topping, and the Euro looks poised to break above longer term moving averages

Have a great week!

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