Weighing The Week Ahead: A Letter From Mr. Market

Ipad, Online, Tablet, Internet, Screen, Digital

We have a big week for data and only four days to digest it. Retail sales and housing data will be most important. Industrial production will provide evidence about the strength of the recovery.

Some of the punditry will get lost in the data while others continue the fruitless effort to reconcile market prices with economic fundamentals. (Schwab, Paul Schatz).

I normally join in these efforts, but something special happened last week. My key questions have been answered by: A letter from Mr. Market.

His explanation, intended as friendly advice for me, is so important that I must share it.

Last Week Summary

In my last installment of WTWA, I discussed the Reddit Rebellion with an emphasis on whether it represented a threat to the average investor. I warned to avoid the drama, which is proving to be good advice. This exciting action must be important because CNBC reports action in the key stocks in the featured ticker, right along with the major averages.

The heroes and villains have changed a bit, but the story certainly has legs.

Key Charts

I always start my personal review of the week by looking at some great charts. This provides a foundation for considering news and events. Whether or not we agree with Mr. Market, it is wise to know his current mood.

I am featuring Jill Mislinski’s chart of the market week. Her approach combines several key variables in a simple readable format.

Sector Trends

Sector movement is another important clue to market trends.

Comment

The market gained 1.2% on the week with a trading range of only 1.3%. You can monitor the actual volatility versus the VIX over several time periods in my Indicator Snapshot, featured in the Quant Corner below.

Noteworthy

One of my regular reads is Victor Niederhoffer’s Daily Speculations. The typical format is a brief comment from a contributor followed by some interesting reactions. Readers interested in BitCoin may find the discussion especially interesting. Here is the opening comment:

Alex Castaldo writes:

what does dr burry mean by his btc mining tweet today

(20) Cassandra on Twitter: “70% of $BTC is mined in sanctioned countries, China, Iran, Russia. Crypto is in a race – add enough reputable agents of commerce to counter and overcome the inevitable coordinated actions of the ECB/BoJ/Fed/IMF/WorldBank-level powers-that-be to crush it. https://t.co/glYdmeTJ4g.” / Twitter

70% of $BTC is mined in sanctioned countries, China, Iran, Russia. Crypto is in a race – add enough reputable agents of commerce to counter and overcome the inevitable coordinated actions of the ECB/BoJ/Fed/IMF/WorldBank-level powers-that-be to crush it.

The News Overview

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

Good

Corporate Earnings

  • With 74% of the S&P 500 reports in, 80% have beaten estimates. The size of the beats, at 15.1%, is the third highest level in more than a decade. (John Butters, FactSet).
  • The adjusted growth rate for Q420 is now 2.9%, the first positive reading for 2020.
  • Revenues are beating estimates by 78%, also a near-record level.
  • Brian Gilmartin tracks the continuing upward revisions in forward earnings.

Coronavirus and Vaccine Distribution

I am delighted to include this topic in the “good news” section. May of my regular data sources reflect the reduction in new cases. For the U.S. as a whole, new cases are now below 100K on a moving average basis, the lowest level in more than three months.

My own favorite indicator is the percentage of positive tests. I calculate this from other sources and maintained my data since June. The rate for the last month was 7.5%, down from 13.5% in my last report. We are not back to the best levels from six months ago, but it is a definite improvement.

Housing

The housing news remains positive on several fronts.

1 2 3 4
View single page >> |

Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.