The Week Ahead: Is A Market Breakout Finally On The Way?
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In sharp contrast to last week, the punditry has less to chew on this coming week. This leaves the media agenda wide open. Discussion will range freely on the potential for the economy as well as the markets. Expect to see stories about China, Europe, low volume, low volatility, and the implications therefrom.
Everyone is expecting the quiet time to end, with a break in one direction or another. Will it be this week? Or are we in for a continuing quiet time?
Prior Theme Recap
Last week I expected plenty of discussion about the economic data, finally providing some clarity about the direction of the economy. This was indeed the main subject for discussion, but the data changed few minds. The overall effect was positive, as you can see from Doug Short's weekly market summary – a good discussion featuring this chart:
Forecasting the theme is an exercise in planning and being prepared. Readers are invited to play along. I work on it each week because it helps to prepare your game plan for the week ahead. It is not as easy as you might think. Feel free to suggest your own likely theme in the comments.
Naturally we would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react.
This Week's Theme
I suggest: Be prepared! It is quiet, too quiet.
Nearly everyone expects a rebound in volatility.
Here are some perspectives.
Josh Brown wonders if we will experience "the annual letdown" that we have seen in the last few years.
Barron's notes the improvement from the "strong manufacturing and jobs data."
James R. Hagerty, writing for the WSJ, has a balanced discussion about the potential for a U.S. manufacturing rebound – both sides examined carefully.
Dan Greenhaus at BTIG provides (via the WSJ) a list of 26 current investor worries.
As always, the conclusion may depend upon your time frame.
We always use our planning to be prepared, but the current market is a special test. Charles Kirk sets a great example for traders. His invaluable weekly chart show cites both the bullish underpinnings and also the possibility of an early-week test of recent trading gaps. He explains what to watch. (The Kirk Report has a small membership fee, which you will recover almost instantly in your personal trading. The weekly magazine is an entertaining and instructive mix of ideas that I always review in my preparation).
As usual, I have some thoughts that I will share in the conclusion. First, let us do our regular update of the last week's news and data. Readers, especially those new to this series, will benefit from reading the background information.
Last Week's Data
Each week I break down events into good and bad. Often there is "ugly" and on rare occasions something really good. My working definition of "good" has two components:
The news is market-friendly. Our personal policy preferences are not relevant for this test. And especially – no politics.
It is better than expectations.
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