Trade Journal for the Week of April 3, 2017 - Still waiting for "Hard" and "Soft&quot

Yesterday’s non-farm payroll numbers whiffed big time. The stock market had a muted reaction although Industrials moved higher. Vulcan Materials (VMC) is a stock we own that was up nearly 4% yesterday.

Perhaps the market expects the Trump Administration to refocus their efforts on infrastructure spending considering the weak jobs report.

Federal Reserve Bank of Atlanta GDPNow has lowered their 1Q17 GDP forecast to 0.6%, down from nearly 3.5% at the end of January.

They state, “The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 0.6 percent on April 7, down from 1.2 percent on April 4. The forecast for first-quarter real GDP growth fell 0.4 percentage points after the light vehicle sales release from the U.S. Bureau of Economic Analysis and the ISM Non-Manufacturing Report On Business from the Institute for Supply Management on Wednesday and 0.2 percentage points after the employment release from the U.S. Bureau of Labor Statistics and the wholesale trade release from the U.S. Census Bureau this morning. Since April 4, the forecasts for first-quarter real consumer spending growth and real nonresidential equipment investment growth have fallen from 1.2 percent and 9.7 percent to 0.6 percent and 5.6 percent, respectively.”

On Metals

Copper prices are coiling in a tight fashion. After a post-election bump on expectations of greater economic growth under the Trump Administration prices have pulled back. A break to the downside will confirm the markets suspicion about the Trump Agenda becoming a reality.

Gold and silver on the other hand sold off in the post-election rally and have found a base and could be poised to move higher. If the economic picture doesn’t improve and lackluster fiscal policy and additional economic weakness ensues, the Fed would need to take a more dovish stance. That would be good for gold and bad for financials.

Speaking of the financial sector, we are watching for a breakdown in that sector as it has the second greatest weighting in the S&P 500, approximately 15% of the index. The continued flattening of the yield curve doesn’t bode well for the sector or the entire Trump reflation trade.

On Geopolitical Events

The news of the Syrian bombing on Thursday evening had equity futures lower and gold rallying. Those fears subsided throughout the trading day. My risk-off indicators headed lower.

The Aerospace and Defense sector looked strong. After testing the 38.2% Fibonacci retracement from the post-election rally it has remained in its bullish uptrend. Looking for a bullish MACD cross and perhaps we’ll start looking at some defense names.

Joseph S. Kalinowski, CFA