New market thoughts from Raymond James’ Jeff Saut:”The Great American Eclipse” 08/22/17

“This was the first total solar eclipse in the continental U.S. in 38 years. The last one occurred February 26, 1979. Unfortunately, not many people saw it because it clipped just five states in the Northwest and the weather for the most part was bleak. Before that one, you have to go back to March 7, 1970.
Well, the “Great American Eclipse” has come and gone, but you may still be stuck in traffic if you’re one of the 7.4 million Americans estimated to have traveled to the path of totality that ranged across the entire country. The typical summer afternoon cloud cover here in Florida even held off long enough for us to all get some good views, with the few proactive people who planned ahead and bought glasses emerging as heroes among the crowd. In keeping with the spirit of the occasion, the Guggenheim Solar ETF (TAN) is actually looking pretty good, technically, despite ironically being down 2.31% yesterday on eclipse day. It’s done pretty well since breaking above the 200-day moving average about three months ago, and is now pulling back to the area around $21 that has a history of importance (see chart on next page). Hopefully, it has brighter days ahead of it!
Switching gears, investors seemed to be more interested in the sun than stocks yesterday, as the S&P 500 traded within only a 13 point range during the session. The index did hold its 100-day moving average around 2417, but buyers were unable to push the market back up to levels that make us feel more confident a bottom has been made. It remains “oversold” by one standard deviation compared to its 50-day moving average, but, then again, the range over the last 50 sessions hasn’t exactly been large so being one standard deviation away isn’t exactly that stretched.
Meanwhile, the political situation in D.C. continues to receive most of the attention, but keep in mind that we have been saying since early this year that the great stock market run we’ve experienced since the February 2016 low has more to do with earnings growth and the global economy improving than it does with political agenda expectations. That belief only intensifies any time a perceived political disappointment fails to really rattle the market, and we continue to think that getting something like tax reform done probably has more potential for an upside surprise than a downside surprise at this point considering expectations are so low. The collective narrative seems to be that the recent shakeups among President Trump’s advisors will only make it less likely that anything gets done in the months ahead, though Strategas Research Partners offers a different take.
They argue that because the recent wave of criticism seems to be putting the Republican-led Congress in jeopardy of holding their majority in the mid-term elections next year, “this should force Republicans to seek legislative accomplishments, which goes against the consensus that Trump’s troubles will lead to no tax reform.” Of course, complete tax reform was always going to be a difficult task, but there does seem to at least be a chance that having their jobs on the line may spur lawmakers to action, again setting up the possibility for an upside surprise next year. Unfortunately, predicting politics isn’t the exact science predicting total solar eclipses is, as we are already know the next one will hit the U.S. in 2024! Will the secular bull market still be going on then? Only time will tell, but this morning the futures are a little better with the dearth of any market-moving news continuing.

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