This morning, the focus is on the second quarter Gross Domestic Product (GDP), which was once expected to be as robust as 4.3%.  The Atlanta Fed is now looking for 2.8%, which is an increase after yesterday’s Durable Goods Report.  I have some misgivings about the Atlanta Fed model, and I think the number could come in above 3.0% this morning. However, we have to assume or hope that a coiled spring is finally stretching out. 

I think it’s beginning to happen.  For now, however, the market will need to be convinced over and over until it becomes conventional wisdom.

The market tech turned lower yesterday and will be under noticeable pressure this morning after a collapse and earnings miss from Amazon (AMZN).  No, I’m not panicking, but the stock will get nicked; that might be the cue to start taking cash off the table for other tech names. If this happens, we need to see those funds find their way into the following names:

• (XLY) Consumer Discretionary
• (XLE) Energy
• (XLB) Materials
• (XLI) Industrials

Yesterday, Consumer Staples (XLP) was the best performing sector, but I should caution that valuations are generally high for most of these names. Speaking of caution, the CBOE Volatility Index (VIX) is at an all-time low and for many, that’s a screaming red flag. The problem is that it’s been a screaming red flag for several years, and thousands of Dow Jones Industrial points.  I’m actually more concerned with internals as there have been more actual losers than winners in some of the big up days for major equity indices.

 

Today’s Session

This morning the market looks lower after lots of earnings misses and mixed earnings results, particularly in the oil patch. Shares of all the biggest names in the industry will be lower and lesser. Oil-related stocks are going to be slammed at the opening bell. 

US Steel caught a downgrade for the second session in a row. This time a ‘sell’ from Citigroup – we are looking into this.

Gross Domestic Product

2Q17 GDP came in line with consensus of 2.6%, but the first quarter was revised to 1.2%.  The report actually is better when combing  all the details, but the yellow flags are problematic.

Positives

Personal Consumption Expenditures 2.8% from 1.9%

• Goods 4.7% from 0.7%

Private Domestic Investment

• Structures +4.9%
• Equipment +8.2%

Yellow Flags

Personal Consumption Expenditures

• Services 1.9% to 2.5%

Private Domestic Investment

• Residential -6.8% from +11.1%

This is going to be a tough session, but it’s been a tough week as breadth has been negative all week long.  It’s not panic time, the market has had a nice run, but it’s time to ring the register for ideas that seem stretched.  

Comments

got back on the TV we miss you insight!!! WILLIAM J. RUETZ on 7/28/2017 11:45:32 AM

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