Watch Out for a Move Higher in Stocks

Stocks have begun the day to the downside, as investors continue to use the Trump Administration’s tariff on imported steel and aluminum as the reason for the continued decline.  The fear is that manufacturers will need to pay an increased premium for items such as cars, which could add upward pressure to consumer inflation.  A look at the stock charts shows an interesting pattern underway that could point to higher stock prices in the near term.  Since markets never move in a straight line, we can expect to see dips along the way.  Generally, even in a period of rising stock prices, we will see a mid-term correction in the valuations of the market.  Even as stocks are moving higher overall, they can lose up to half of their increased value in any given run higher.  This could be what we are seeing now.  If that is the case, we have hit that 50% line and would now expect to see stocks climb higher in the near term.  We will have to wait and see if this is how the market plays out.

Although today is a light day for economic reports, the week has some important data releases to look forward to.  Wednesday we will get the first look at the health of the Labor Market in the month of February when ADP releases their estimate of new job gains during the month.  Then on Friday, the Bureau of Labor Statistics (BLS) will offer their estimate.  In both cases, the market is anticipating about 200,000 new jobs to be the numbers reported.  However, the highlights of the reports could be wage growth, as that is considered to be one of the most reliable leading indicators of consumer inflation.  Remember that President Trump believes we can have strong wage growth without higher overall inflation.  However, most experts don’t agree with his opinion.

Although this sounds like a broken record, we will maintain a locking bias.