Another Strong Week On Wall Street Ahead Of The Long Weekend

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The bulls showed up and sent stocks soaring last week helping the S&P 500, Nasdaq composite and Nasdaq 100 hit fresh record highs. The month ends next week and the end of the month typically, but not always, has a slightly upward bias. One of the hallmarks of a bull market is to see the market brush off nearly all negative news and race higher. Since the election, that is exactly what is happening. The market had every chance in the world to fall after the big sell-off on Wednesday 5/17/17. Instead of falling, the bulls showed up and quelled the bearish action and sent stocks racing higher. Once again, the sell-off was very short in nature which just reiterates how strong this aging bull market is right now.

In the short term, May’s lows are the next level of support to watch, then the 50 DMA line for the S&P 500, Dow Industrials, Nasdaq Composite, and Nasdaq 100. Then, the next important levels of support to watch are: Russel 2000: 1351, then 1335, then 1308. The Dow Industrials: 20.6K, then 20.4k, S&P 500: 2352, then 2322.25, Nasdaq Composite: 5995, then 5805, then 5769.39. Until those levels are breached on a closing basis, the bulls remain in control on a short, intermediate, and long term time-frame. We are often asked about why the market is holding up so well with everything that is happening in the political arena.

The answer is simple: investors only care about what policies come out of D.C. that directly impact Main Street or Wall Street. So far, the policies have been bullish for the economy and, as investors look forward there appears to be more economic-friendly policies in the pipeline. As previously mentioned, the other, more important, reason is that we are in a very strong bull market, and we pay much more attention to how the market reacts to the news.

Mon-Wed Action:

Stocks rallied on Monday as President Trump secured big contracts from Saudi Arabia and other countries on his trip. A slew of defense stocks soared after the deal was announced. Shares of, Blackstone (BX)BX, also soared after the company announced the creation of a $40 billion infrastructure investment fund with Saudi Arabia’s Public Investment Fund, the country’s main sovereign wealth fund. Stocks rallied on Tuesday after the White House released its budget. The proposed 2018 budget, will likely change before it is approved, aims to cut federal spending by $3.6 trillion over the next 10 years. Stocks edged higher on Wednesday after the minutes of the Federal Reserve’s last meeting were released. The Fed plans to slowly reduce its massive $4.5 trillion balance sheet. Thecentral bank wants to do it slowly and delicately. The Fed will announce cap limits on how much it will allow to roll off each month without reinvesting. To help ensure market stability, the Fed said it plans to reinvest any repayments that exceed the pre-determined cap. Separately, Moody’s downgraded China’s debt. A few hours later, China responded by adjusting its currency and that helped stocks rally on Thursday.

Thur & Fri Action:

The S&P 500 and Nasdaq composite both vaulted to fresh record highs on Thursday as a slew of big cap tech stocks soared to fresh record highs. Shares of Amazon (AMZN)AMZN, hit $999/share and are currently flirting with $1,000/share. Separately, oil prices plunged -5% after OPEC agreed to extend the production cuts until March 2018. Elsewhere, jobless claims hit 234,000, which was slightly higher than the prior week’s reading but remained near the lowest levels in 40 years. Stocks were relatively quiet on Friday after the government revised Q1 2017 GDP up to 1.2%. Meanwhile, Durable Goods fell -0.7%, missing estimates for a decline of -1.0%.

Market Outlook: Stocks Are Strong

The market is very strong. As always, keep your losses small and never argue with the tape. Want Adam To Be Your Personal Portfolio Consultant? You Don’t Have To Feel Alone In The Market, There Is A Better Way: Learn More

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