Models remain bullish into month-end

Raul3 Sun Jan 28, 2018 1:42pm EST 1 Comment

January is nearly complete. And then? February.

The trading model is bullish for a fourth consecutive week. It is safe to say, in hindsight, that the model absolutely crushed January. Which is nice. While more-and-more rally skeptics voiced their concern about how far and high 2018 has already gone, the robots keep us on the right side of the tape.

Overall I think it makes sense to take some profits, but only if you intend to invest them somewhere else. Like new windows for your house. What is nice about investments in real estate is you can enjoy it. The most you can do with a stock is take to Twitter and be a fan-boy. Which is kind of enjoyable, especially with Tesla, because it is such a divisive concept.

There is a fed rate decision Wednesday. The gambling halls in Chicago currently show a 96.4% probability of the target borrowing rate remaining unchanged at 150 basis points. In my opinion they need to start hiking rates more aggressively, and pump the proverbial brakes, but it seems like we are really enjoying all this winning. So it is not likely.

The March rate decision is a live meeting. There is a 76.8% probability of a 25bp hike.

Because of the odd, mid-week ending of January, we will also have non-farm payroll on Friday.

All that important economic data is on top of us heading into a heavy earnings week. Our tech overlords at Apple, Google, Microsoft, Amazon, and Facebook—AND Alibaba all report this week.

I spoke with a Google employee last night. She is quite optimistic about the direction of her company. She told me keep an eye on some specific parts of the business, but we were in the basement of a parking garage, crammed in an orange room filled with loud, repeating house music and cannabis smoke. I think I may have caught a contact high, and I do not remember those specifics.

How’s that for a useless anecdote?

Through all the commotion of the upcoming week we have our quantitative signals to guide us. They are calling for a calm drift. We have Wednesday afternoon to watch as a pivot point. And as always we have auction theory for clarity. So we will do what we always do—take it one day at a time.

Raul Santos, January 28th, 2018

Exodus members, the 167th edition of Strategy Session is live. Go check out a few caution signs we need to monitor next week.