With a light economic calendar, there is plenty of air time for pundit pontification. The record-setting market still has many shaking their heads. Many, after noting the many world problems, are asking:

Where is the fear?

Last Week Recap

My last edition of WTWA (two weeks ago) asked whether earnings season could spark a big rally. That was a pretty good topic to consider over the last two weeks. (And it is still quite relevant).

The Story in One Chart

I always start my personal review of the week by looking at this great chart from Doug Short via Jill Mislinski. She notes the gain of 0.86% on the week, as well as other key comparisons. Once again, it was a week of very low volatility.

Doug has a special knack for pulling together all the relevant information. His charts save more than a thousand words! Read the entire post for several more charts providing long-term perspective, including the size and frequency of drawdowns.

Personal Note

Mrs. OldProf and I enjoyed our weekend away, and she thanks readers for the birthday good wishes. The only bad news for her was the loss of one of her favorite football players (second only to Jordy). When we got back, my calendar included a webinar featured by Brighttalk, which readers might enjoy.

If you missed my “Monty Hall” post, you might want to check it out. I cite some modern applications of the classic three-door problem.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

The economic news has been mostly positive. 

The Good

  • Industrial production rebounded from last month’s decline to a gain of 0.3%, beating expectations.
  • Corporate earnings have been solid, with 76% of S&P 500 companies beating expectations. (Factset).
  • Conference calls have been positive. Avondale has detailed notes. Corbin Perception also notes strength in industrial sentiment. More than half regard industrial equities as fairly valued, with “overvalued” declining. Tax reform or infrastructure spending are not priced into the market.
  • Philly Fed
    index of 27.9 rose significantly from last month’s 23.8
  • Existing home sales registered a slight beat of expectations with an annual rate of 5.39 million. Calculated Risk treats anything over 5 million as “solid.”
  • Jobless claims declined to 222K. (Bespoke) New Deal Democrat’s hurricane adjustments for this series have proved accurate.
  • The Bad

  • Housing starts declined to a seasonally adjusted annual rate of 1127K, a decline from August and a miss of the expected 1160K. (Calculated Risk).
  • Leading indicators declined 0.2% after last month’s gain of 0.4%, missing expectations by 0.3%.
  • The Ugly

    The 1987 market crash and allegations that 2017 is similar. LPL Research has a nice explanation of the differences, including the charts below. The first is a version of one popular among those who want to make sure you are scared witless. The second uses percentage changes for a valid comparison.

    A Chuckle

    Charlie Bilello makes creative changes in some classic market slogans. Here are the first few “Aphorisms in the Year of the Bull”:

    Buy in May and Stay Leveraged Long

    Buy the Rumor, Buy the News

    Buy the Dip, Buy the Rip

    Be Greedy When Others Are Greedy

    The Week Ahead

    We would all like to know the direction of the market in advance. Good luck with that. Second best is planning what to look for and how to react.

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