President Trump shared the tax reform proposal to simplify the tax code. They include:
But, it’s not clear how his government plans to cover the loss in tax revenues.
Stock markets and investors welcomed the new outline. The equities reacted by climbing higher in anticipation of a stronger economic growth.
In another news, Janet Yellen stayed firm about Fed's gradual rise in interest rates. Her comments didn’t budge the market this week. Instead, it continued to move up.
Micro-cap ETF, IWC and small-cap ETF, IWM were the leaders for the week. Both gave more than 2.5% positive returns. Large-cap ETFs like DIA, QQQ and SPY were the laggards. It's very clear that there is a confirmed change in risk appetite from the investors. But, there isn't change in the overall ranking for 2017. Technology driven ETF, QQQ still lead the front with about 22% in returns for the year. The rest are far behind. They display gains between 8%-13%.
DAILY CHARTS: MARKET INDEXES
SPY, IWM and IWC showed strength. They reached all-time high for the week. DIA and MDY seem to be ripe for a climb to new highs too. QQQ would need some time before it decides to breakout from the consolidation that began in late July 2016. MDY, IWM and IWC have been rising since mid-August 2017. They are due for a well-deserved rest to digest the impressive gains in a short period.
WEEKLY CHARTS: MARKET INDEXES
IWM, MDY and IWC have been climbing up for three consecutive weeks. The strong climbs show the level of risk appetite amongst the investors. DIA and SPY are also making a commendable uptrend but less steeper. QQQ looks like it's about to form a flat line and take a break from a long price climb that began in Jan 2017.
MONTHLY CHARTS: MARKET INDEXES
There are cries in the community that there will be a bear market in the near future. Based on the long-term charts above, they're saying otherwise. MDY, IWM and IWC have been in multi-month consolidation and they are either ready to breakout or have already rocketed higher. DIA, SPY and QQQ aren't looking exhausted at all. In fact, their momentums have been strong since end of 2016. But, if you were to take a closer look at their chart, especially technology driven QQQ, it seems like it's currently taking an intermediate break.
DAILY CHARTS: US SECTORS
WEEKLY CHARTS: US SECTORS
MONTHLY CHARTS: US SECTORS
Every sector is showing an uptrend with an exception for XLE. It is still consolidating sideways from the two-year downtrend that began in mid-2014.
In short term view, the indicator shows that investors are beginning to be 'more greedy'. And more are taking riskier securities to grow their capital. However, the sentiment was opposite last month. Majority of the investors are worried and fearful about how the stock market would be performing. This arose from the proven historical research about the stock market performing poorest on every September.
Here are my quick takes if you’re short of time to digest the information above.
Stocks ended the week, the month, and the quarter higher! The bulls remain in control of the market. The major indexes have more room to run higher. It’s especially true in the fourth quarter where it tends to be a profitable season for the market.
In the short term, there's gradual uptrend with occasional shakeouts along the way. But when you look at long-term charts such as weekly or monthly time frames, it's clear that the uptrend is strong.
You’re wasting tremendous opportunities when you ‘overreact’ to market corrections. Yes, it’ll happen. There’ll be major breakdowns in this solid bull market.
The market will give clear signals when it is rolling over. Manage your risk by learning how to exit with stop loss strategies that are available online.
One way is to raise your stops as you ride the trends. It’s important to take advantage of the upside while protecting your downside.
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