Cautiously Optimistic

This weekend a friend asked me for my overall opinion of the market.  My answer was Cautiously Optimistic.  If you look at the economic markers such as jobs, interest rates, business growth, and wage growth, it’s pretty darn hard to be anything other than optimistic.  A quick look at the index charts and all you can see is bullish trends.  So why the caution?  The short answer is the appearance of extreme complacency.  Almost nothing seems to shake this market.  Look at the same index charts with a critical eye and its hard not see a bit of complacency.  The question on my mind is can earnings support these price levels or has complacency pushed us to high in anticipation?  As a result, I’m Cautiously Optimistic as we move into the bulk of earnings reports.

On the Calendar

A slow start to the Economic Calendar this week, with no market-moving reports and just a few bond auctions.  Perhaps that’s a good thing as the market deals with day-3 of the government shutdown and all drama whipped up by both sides of the aisle.

There are just over 40 companies reporting earnings today with HAL, PETS, & WYNN before the bell.  After the bell, Tech will be in focus as NFLX will dominate the earnings news.

Action Plan

Friday’s market saw a Dow index and the Dow Futures oddly decouple.  A good portion of the day the Dow index was trying go down while the Dow Futures relentlessly pushed higher.  Ultimately the Index closed positively, but the futures were sharply higher.  The SPY, QQQ and the IWM all closed at new record highs.  Price action overall seemed to rather slow and choppy as we heading into the weekend.

Futures this morning are pointing to a lower open as the market reacts to the government shutdown.  Currently, Dow Futures are pointing to a gap down of about 40 points.  I’m honestly surprised the reaction isn’t stronger considering the stretched overall condition of the market.  With no economic reports to react to the market may be a bit more sensitive to the congressional news as its spun one direction and then another.  Earnings reports really begin to ramp up this week.  Our first big tech report is after the bell today with NFLX steps up to report results.  Don’t be surprised to see higher volatility companies must prove these elevated levels can be justified.  There is a lot no the line!

Trade Wisely,

Doug