Morning Market Thoughts
Good morning. Another relatively flat open as traders around the globe wait to see the outcome of what’s been called “Super Thursday”.Tomorrow we’ll hear from James Comey as he offers testimony to Congress on various matters, all of which you know about.
Also, the ECB is set to announce its newest monetary policy decision about its GDP growth and inflation outlook and whether to start tightening monetary policy.
Lastly, the United Kingdom holds its general election in less than 24 hours, and the result could be a market mover. I won’t offer any conjecture on the ramifications of the election outcome for the simple reason that I don’t know much about it. It’s tough enough to keep up with domestic politics. I won’t even try to understand the politics on the other side of the ocean; instead, I’ll just watch the market and know that the wisdom of the trading crowd will figure things out.
Aside from the headline matters just mentioned, I notice that metals and mining stocks are close to breaking out. The SPDR Metals and Mining ETF ($XME) has been declining since its peak in February, falling more than 20%. But over the past several weeks, this sector has been consolidating and looking like it’s time to consider steeping back into this sector. Similarly, the basic materials sector ($XLB) actually hit a new all time high last Friday. It’s been building a base most of the year and also looks poised for more gains. Both of these sectors could be factoring in the proposed $1 trillion infrastructure spending program.
Here’s how it is supposed to work: The federal government ump will spend $200 billion on infrastructure projects over the next 10 years. It is hoped that this spending will prompt an additional $800 billion in spending by the private sector, states and local municipalities. A rarely discussed topic is the extent to which the federal government should be footing the bill rather than just allowing the individual states to deal with their own issues. After all, there are 50 of ’em; and I’d like to think that each state has a better handle on what needs to be done than a central planner in Washington, D.C. But either way, the market likes it when the government — any government — spends money. Over time, a $1 trillion spending program boosts stocks. As such, I’m a big fan of any infrastructure program that actually passes Congress.
In this weekend’s Weekend Update, we’ll look at the metal/mining and basic materials sectors. There are several stocks that are flashing “right here, right now” signals and I want to get in on them before the rest of the market does.
Don’t forget about the trader training session at noon today (9 am Pacific Time). We’ll be looking at trading opportunities in the current market environment, and I’ll be covering any stocks that you are interested in. I always look forward to these sessions and I hope you’ll be there.
–Dan
Market Update