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10 Indicators To Watch In The Stock Market For The Week of May 28
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF NFLX & AAPL
The coming week will be a big week when it comes to data, with inflation and jobs data starting on Wednesday. First, we get ADP private jobs data, with consensus looking for 186,000 jobs created in May, and then 1Q GDP comes later that morning with consensus calling for growth of 2.3 percent. Thursday is personal income and outlays, PCE y/y is expected at 2 percent, while PCE Core ex-food and energy is projected at 1.8 percent. Friday is the employment report, with estimates calling for 185,000 jobs created, and average hourly earnings up 2.7 percent y/y. You can find more at the Bloomberg calendar, a handy tool.
So, we should expect the week to have a little more volatility following the numbers, each day, but this week will most certainly be all about inflation. When you look at core PCE over the course of the last 10-years, we can see that it has been consistently low.
PCE like the other gauges of inflation, like PPI and CPI, tracks extremely closely to the price of Oil.
By the way in case you are curious you can see the similarity with oil and PCE ex-food and energy, are not as close.
When it comes to the future of inflation and interest rates, we will need to watch the price of oil. Wages should continue to remain contained as well below 3 percent.
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So is it possible that we see some huge spike in inflation worries this week, well anything is possible. Is it likely? I have a decade worth of data saying no. Additionally, one must remember that the data is backward looking, and oil is a real-time barometer of inflation, and so if oil continues to fall come Tuesday, then I suspect rates fall with it, regardless of the reports.
Stocks To Watch
The most important stocks to watch this week, Netflix, Amazon, Apple, Micron, Biogen, Microsoft, P&G, and Coke. Yes P&G and Coke! Really. Remember if rates are falling then the staples, which have been crushed, should see a rotation back into the names. The other stocks are leads in the most important risk-on sectors around, Technology, Chips, and Biotech.
The chart of P&G is bullish and suggests shares could rise back to $78.20 in the short-term. The relative strength index (RSI) is trending higher and has bottomed out at oversold levels now on two occasions.
The setup in Coke is quite positive too and looks to be heading back towards to $44.50
Microsoft broke out, and we want to continue to see the stock rise. The relative strength index continues to trend higher as well.
Biogen has broken out as well, and it could be looking to rise back towards $300.
Apple has been consolidating since its post-earnings rally, and a breakout higher from the markets most valuable company, would add to positive sentiment.
Micron is facing a potentially big breakout. Micron has been one of the hottest stocks around, so we want to see this one continue to stay hot, as it acts as a barometer for the risk appetite of the market.
Amazon is knocking on the door of a big breakout too.
There is no doubting that Netflix is the undisputed champion in the market this year, and there is no stock that is more important. If Netflix continues to rise, then I suspect the rest of the market will soon follow.
Enjoy the long weekend.
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Tags: #sp500 #inflation #oil #yield #microsoft #apple #netflix #amazon #biogen #micron