Stocks may have closed flat and mixed on Friday, which was the overall theme of the week as well. For the week, the major indices closed out with the S&P 500 flat, the Dow up 0.4% and the Nasdaq down 0.3%. It seemed as though the stock market wanted to move higher, but there was just not enough political or economic news to send the major indices toward a big, upside breakout. We are holding and hovering at all-time highs, but the catalysts that would maybe push stocks toward robust all-time highs were just not there.
Many strategists say that this hesitancy is a good thing, particularly from a technical standpoint. The major indices have been in a calm, upward trend all year, and the calm upward trend rises and falls, but the trend line remains solid. It never breaks out aggressively, but it also never breaks down from the uptrend. The other “plus” among strategists and technicians is how various “down and out” sectors like semiconductors, financials and even energy companies keep seeing upside.
We had the Fed Heads meet this week, and the comments played well. There was little chance of a rate hike, and we did not see one. Janet Yellen was straight forward about rate hikes and the “shrinkage” of the Fed’s $4.5 trillion balance sheet. It will begin with $10 billion per month, and while that statement did not rattle markets, $10 billion per month barely makes a dent. With the stock market hitting new highs, however, there are rumors that the Fed might even raise rates by a half point in December.
The whole “rescue” following the 2008-2009 financial crisis that drove interest rates down toward zero was supposed to be temporary, so the move toward interest rate “normalization” was supposed to have been quick. Like any grand plan, the move toward higher rates has taken a long, long time. The Federal Reserve has taken a back seat during this year’s market rally. We no longer, at least for now, have investors on the edge of their seats waiting for “what the Fed has to say.” That is probably good.
One of the strange developments this week was seeing Apple (AAPL) close out the week about 6% off its all-time high. The lines for the new iPhone 8 were light, and negative feedback on the new watch may have weighed a bit on Apple this week. Apple is still Apple, though, but it has not launched multiple products in the past, and the late, great, Steve Jobs might not like it. Apple was the lead dog of the eight-year bull market, and when a leader stops leading, it is historically worrisome for the broader stock market.
So the big question mark for investors right now is whether DC can get along and pass some sort of tax reform or tax cut sooner rather than later. Any legislation could send stocks soaring, so we will see what happens in the weeks ahead. Earnings season is right around the corner, which will be what investors look to for direction in early October. The great part about all of these variables is that stocks are at all-time highs, and as we head toward October, that is a place that the bulls are happy to see.
That said, the Gorilla will be back in action on Monday, and he wishes each and all a happy first weekend of Autumn. With all of the hurricanes, global tension, and earthquakes, we are somehow surviving. Again, have a great weekend, and we will see you next week!Read what Gorilla Trades has to say every week night, get the top stock market picks that the internet has to offer and start investing like the pros. Try the Gorilla Trades stock picking service free of charge now!
The Gorilla has gone mobile! Download our stock picking app now for the hottest stock picks delivered right to your phone!