Stock Market: Two (No Three) Great Pieces Of News
|We didn't know what pic to include|
so what the heck, put Trump(s) in
there again. Go debt ceiling!
S&P 500 SPY ETF Signal
As of the open August 7th we have a shorter term bullish SPY signal after having been flat for a few days. Add that to the bullish fundamentals and we're getting even more bulled up.
We showed on Thursday that a weak May report in June capped the stock market from hitting new highs. A strong June report in July allowed the market to continue on to new highs. We said on Thursday that "If non-farm payrolls meet or beat the Street the market has every excuse to keep rising."
Non-Farm Payrolls did just that. They reported 209,000 for July which was nicely above Street estimates of 175,000.
We've been saying that the jobs reports are the most important economic number that exists to markets. The rest are nice but if people are working they spend and that drives the economy, earnings and so drives stocks. (You don't need to go to college now, we just wrapped it all up for you in that one sentence.)
Again, we're going to keep this awfully simple for you so you don't have to waste your time trying to figure out what drives stocks.
Jobs are the most important economic indicator but earnings are the most important indicator (period) that exists for stocks. Stock valuations are purely based on their earnings prospects divided by (some measure of ) interest rates (which by the way are still near pre-historic lows; we'll get to that).
And those earnings prospects are heavily biased by the here-and-now.
And what's going on now? Earnings are great.
Factset said this second quarter is going to trigger the first time since 2011 where we had two quarters in a row of "double digit" (10%+) earnings growth.
Now For Rates: Still Near Prehistoric Lows
If anybody went to college (even though we simplified the entire stock market down to one sentence some people still want to go) you know that valuations are figured out by dividing future cash flows by an interest rate (risk free rate).
The lower that denominator (interest rate) is the higher those current valuations are today.
So with low rates what's that mean for today's valuations? High. Those high valuations are "fair value." Stop saying high! Say fair!
And how good are those expected cash flows in the future? They're great because current earnings are great. And current earnings are probably the biggest factor when trying to guess future earnings.
So you have great earnings and a low rate denominator... Which way are stocks going?
There you said it yourself. They're going up (please carefully read our 240 page disclosure at the bottom of this site before making any investment decisions). Sorry, we think the stock market has all the attributes to continue rising (that last sentence was lawyer approved).
And Now For The Cherry On Top To This Bull Market: WHAT DEBT CEILING?
Ah, life is good. Nothing to complain about. Nothing bad on the horizon. Low rates, great earnings, and no debt ceiling.
You heard it right. The wild-card risk to voting against a "clean raise" of the Debt Ceiling was the Freedom Caucus. There the lone bunch of ulta-conservative Republicans.
Bloomberg Reported that the leader of the Freedom Caucus Mark Meadows said, "I don't believe we should play around with the full faith and credit of our country -- I'm bullish on getting it done."
My (stock market) life is officially complete until year end. Could you ask to hear anything better? Elazar, yeah, that I won that big Powerball Jackpot this weekend. Ok, except that? Well probably that DC is going to pass the debt ceiling with a clean raise. Us too, nothing better than that.
PS and we just looked and other major newspapers are reporting they're still worried about the debt ceiling. Seriously there are so many bears out there on everything. They don't want you to own stocks in this coming 10 year rally. They want to print scary headlines.
Elazar, Wrap It Up For Me. It's Really Popular (By The Way) To Tell Readers How Long Something Takes To Read, How Come You Don't Do That?
Ok, Ok, we'll tell you, you're almost done.
Great jobs, great earnings, low rates, and no debt ceiling. Better than winning the lottery. Have a great week!
OK, You Know What's Next. It's A Must. Time For Reading Comprehension. Hope You Were Paying Attention
What Really Matters To The Stock Market:
A) Scary headlines daily from all the top publications
B) If all the experts say there's going to be a crash tomorrow (every day)
C) If Trump tweets something
D) Jobs and earnings
Please think hard. This is a one time offer; if you need to reread the report to get the answer right we'll allow you but only just this once. And no thirds, sorry.
By: Chaim Siegel, Elazar Advisors, LLC, Happy and profitable trading!
Disclaimer: Stocks reported by Elazar Advisors, LLC are guided by our daily, weekly and monthly methodologies. We have a daily overlay which changes more frequently which is reported to our premium members and could differ from the above report. Portions of this report may have been issued in advance to subscribers or clients. All investments have many risks and can lose principal in the short and long term. This article is for information purposes only. Ratings are based on hypothetical trade directions. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC and their related parties harmless. Any trading strategy can lose money and any investor should understand the risks.