For a stock market that is verging on setting record highs, the action of stock prices during the first week of February 2017 was almost anything but exciting!

For proof of that proposition, check out the trajectory of stock prices against the backdrop of the path we first predicted they would follow five weeks ago.

(Click on image to enlarge)

Over the last several weeks, we can see that the closing value of the S&P 500 has been slowly stair-stepping upward, where the index hasn't shown much volatility. For us however, the trajectory that it has taken continues to fall within the range we forecast back in the first week of January 2017.

That forecast path assumes that investors would remain focused on 2017-Q2 in setting stock prices, which seems to have held through the Fed's January 2017 meeting. This quarter coincides with the expected timing of the Fed's next hike in short term interest rates, which is why we believe investors are collectively focused upon it in making their current day trading decisions.

Looking ahead, for our forecast to continue to hold, the S&P 500 will need to show some upward movement. The next two weeks will hopefully be more interesting than the last five!

Looking backwards again, here are the headlines that stood out to us for what they indicate about the future expectations of investors, along some notes we made during Week 1 of February 2017.

Monday, 30 January 2017

• Fed likely to keep rates steady as it awaits Trump economic plan
• Trump travel curbs slam stocks, hit dollar vs. yen
• Wall Street falls the most this year as Trump honeymoon sours
  • And yet, the S&P 500 was down just 13.79 points for the day, a decline of 0.6% that, for what it's worth, is indistinguishable from the typical levels of white noise of the market's normal day-to-day volatility. For what it's worth, we don't get impressed by what stock prices do in a single day unless the value of the S&P 500 index changes by more than 2% of its previous day's value, which is about the level where you can start identifying any significant factors behind the market's movements.

Tuesday, 31 January 2017

• Oil prices rise on weak dollar, OPEC output cuts
• S&P dips for fourth straight decline
  • The decline was 2.02 points, or 0.09 percent!

Wednesday, 1 February 2017

• Oil rallies to settle up $1 a barrel
• Fed leaves interest rates unchanged, remains upbeat on economy
• S&P 500 ends flat, Apple spike lifts Nasdaq

Thursday, 2 February 2017

• Oil edges down as market downplays U.S.-Iran missile test dispute
• Wall Street stalls as market, Trump priorities diverge

Friday, 3 February 2017

• U.S. energy jobs rise as higher prices boost oil drilling
• Fed's Evans sees fiscal boost to U.S. growth, wants slow rate hikes
• Uncertain U.S. fiscal policy should not handcuff Fed: Williams
  • According to the Fed's Williams, the thing that the Fed will do if not handcuffed is continue its plan to gradually raise interest rates.
• Banks, jobs data send Wall Street higher
  • President Trump's indication that he would seek to roll back the 2010 Dodd-Frank banking regulation law played a small role in the day's rise of banking stocks. We talked to a knowledgable individual on that topic, where they indicated that since its enactment, Dodd Frank-related regulation has been increasingly expanded outside its original scope of protecting the interests of ordinary and relatively unsophisticated consumers to where it is now creeping into areas like business lending, where it is adding considerable costs with negligible benefits. The law also has had the unfavorable impact of choking off competition within the industry and favoring the biggest banks, which harms the interests of consumers, but that was inevitable considering how deeply in the pockets of the banking and finance industry that the principal authors of the legislation were.

For the bigger picture, Barry Ritholtz summarized the positives and negatives for the U.S. economy and markets for the trading week ending on 3 February 2017.