New market thoughts from Raymond James’ Jeff Saut: “I Should Have” 06/18/18

The call for this week: As the astute Bespoke organization notes:
Long-term uptrend channels are still in place (chart 3 on page 4). Nasdaq just breaking out to new all-time highs (chart 4). While the S&P is still in “correction” mode, until it takes out its January highs, a short-term uptrend has emerged off of the April lows (chart 5 on page 5). Small-caps – thought of as a “leading indicator” for the broad market – continue to make new high after new high in 2018 (chart 6). Underlying breadth points to an eventual new high in price for the S&P 500 (chart 7 on page 6).
In our appearance from CNBC’s NASDAQ-based studio last Thursday morning, we were asked about, “Will the Fed’s interest rate increases kill the secular bull market?” Our response was, “The spread between the return on capital, and the cost of capital, is so wide the Fed has plenty of room to raise rates before it impacts the equity markets.” This morning, however, stocks are weak with the S&P 500 futures off some 12 points. Usually the opening on expiration is strong due to investors buying stocks to replace expiring contracts. Thursday’s apathetic action and weak close suggests that today’s NYSE could be soft. Thursday was an Inside Day, which has been occurring at an unusually high rate this year. Traders will be sensitive to Thursday’s high (2789.06) and low (2776.52).

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