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The call for this week
By: Jeffrey Saut | September 25, 2017

We find Leon’s cogent comments timely and are particularly interested in his emphasis on “resource issues”, since we have been of the opinion that commodities have bottomed. Most recently, we discussed the Energy sector, because crude oil looks to have broken out to the upside in the charts (see Chart 1 on the following page) with particular interest in the midstream MLPs. Moreover, as we wrote last week:

In June, the three major indices traded out to new all-time highs, and we noted that, every time those indices simultaneously trade to new all-time highs, the SPX had an average 3.8% gain within the next three months nearly 100% of the time. Well, it is nearly three months later and the SPX is better by some 3.8%. Regrettably, we have underplayed that 3.8% rally, because our models went into cautionary mode at the beginning of August. Most recently, our stock market internal energy model telegraphed there just is not a whole lot of upside energy available right here. Then too, the momentum indicator theorizes the odds of a trend reversal are high on a short-term basis, the breadth indicator is neutral (no trend reversal), and the sentiment indicator is flashing extreme complacency (high degree for a trend reversal). To be sure, our indicators/models are not always right, but they are right a lot more than they are wrong. Sometimes they are early (September 1999 – bear signal, November 2002 – bull signal, November 2007 – bear signal, October 2008 – bull signal, well you get the idea). But just like when flying an airplane in a blackout, you have to trust your instruments. Our “instruments” continue to counsel for caution on a near-term trading basis, and we are titling portfolios accordingly. Longer-term, we remain in a secular bull market that has years left to run.

This morning, North Korea threatens strikes on U.S. mainland in response to DJT’s insults; the German election results were worse than expected; we expect a bunch of Fed officials to spout off this week with the Fed quiet period having ended last week; and with the NFL protests, we have now seen the politicization of everything! Nevertheless, the preopening S&P 500 futures are only down 4 points at 5:00 a.m.

https://www.raymondjames.com/wealth-management/market-commentary-and-insights/investment-strategy

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