It was a long week in the stock markets of the world. The week started with a missile from North Korea over Japan followed by three hurricanes, an earthquake in Mexico and a major data breach. As I write on Sunday 10th September, the State of Florida in the USA is being pulled apart by Hurricane Irma. In Europe, the Brexit negotiations seem to be bogged down and going nowhere while the markets decide on the tapering of QE by the ECB. The latter drove the Euro to new highs over the dollar during the week.
The stock market pretty much shrugged all of the above off, with the SP500 closing down by 0.6%. Such resilience after so many negative inputs shows the strength remaining in this bull market and makes me feel positive in the short term.
The US markets will deliberate on the following over the next few weeks.
- North Korea’s sixth nuclear test and the world’s response
- Damage assessment and rebuilding following Hurricane Harvey and now Hurricane Irma
- FOMC meeting and the possible start to its balance sheet reduction (aka. Quantitative Tightening)
- Raising of the debt ceiling.
The reduction of the USA corporate tax burden from the present 35% to a much lower level.
The latter would encourage the large US companies that have cash stored offshore to bring this back to the USA. Forex desks have calculated that there is 4 trillion dollars in the frame here and if repatriated this would have a major effect on the forex markets and corporate debt markets. I believe that this would act as a very strong positive stimulus for the SP500.
In the UK, the long term trend of the VectorVest Composite is UP while all shorter term measures are Down.
The Composite is shown below where the price action is still contained within the ascending triangle formation that I have been speaking about over the last month. For the FIB students reading the lows of the past few days are a 78% retracement of the last range. These are very important levels and if they are broken the technical situation will have deteriorated significantly.
The advice on the front page of VectorVest instructs not to Buy shares at this time and that’s excellent advice. I will be obeying this advice until there are green lights showing once more on the Color Guard on the home page of VectorVest UK.
Let’s watch stops very carefully over the next few days.
September 10th 2017