“IAM” is the online name of one of our professional trader friends who writes a respected private newsletter to be shared with just a few friends and colleagues. He lets us share the newsletter with you, our readers. We offer it to you largely unedited, so you can see how professionals think and what they talk about. All views belong to the writer.
Range expansion should be expected soon. We have waited for the Inauguration, signing of Executive Orders will begin Monday and then Policy. Simultaneously, earnings season begins to unfurl. This week the companies heading into the earnings confessional will determine if we go up or down or continue to consolidate. Market inertia coming soon?.
Earnings have initially delivered modest beats. It appears likely, Tax Reform, Executive Orders and modification of ACA will have an impact on future guidance. The market still looks to be favoring up and better. We will see.
Like lemmings, as guidance comes in, so will the analysts’ continue to adjust to their newer consensus view. At least two things will be forces for the market to absorb. One is the magnitude of beats and misses. The other is guidance.
Valuation is ripe! Radar contends the adjustments the market will make will appear as earnings and guidance come in. Valuation adjustments may complicate this because they are historically substantially high. How long will this last?
Radar would anticipate the larger the consensus directs, it will win or dismay the hearts of investors. Conference calls will come in and Sector Conferences will sell their wares. It is an import process of the markets and affects forward guidance. It should be interesting to watch the development of their thinking..
There are 10 to 12 focal data releases this week. The market will digest them and anticipate which way to go next. Home Sales are expected flat to modestly lower., EIA indicating soft, PMI still better, GDP and Durable Goods still look modest and up.
The recent consolidation has held value and developed a near perfect January distribution. We will break out of this horizontal development soon. When we do there will be consternation. A trip into the upper stratosphere or a reversion while earnings play catch up. Radar still desires to see backing and filling.
Why A Period of Leanness Appears Forthcoming
Radar went to a presentation on investing 16 years ago. The takeaway was this; if you want to increase asset prices you decrease taxes. In 1999 through 2006 it worked to create increases in housing ownership. It allowed PayGo. The problem was, the idea was flawed by artificial subsidies and subprime lending at the time housing had inflated to levels that normal growth and credit could not sustain. It lead us into a near Depression. If Radar were asked to give a grade on Governance and Oversight, it would be a D.