Weekly Market Forecast: Hurricane Harvey Will Have “Transitory” Impact on Q3 GDP
Equities started the week with a risk off sentiment on North Korean tensions and speculation about the total damage caused by Hurricane Harvey in Houston.
Economists predicted that Q3 GDP would certainly suffer to some extent, but the actual estimates varied widely.
Fed speaker William Dudley stated that effects would be “transitory”, a Federal Reserve favorite buzz word. Dudley approximated that negative impact on GDP would reverse by the beginning of 2018 based on increased spending on construction.
Meanwhile, the government in the US passed a bill to suspend the debt ceiling to the end of December, and tie in an additional $8BN on the budget for Hurricane Harvey relief efforts. The rumor of this agreement on Tuesday helped stocks find a bid and hold their levels throughout the week.
This week, the US dollar traded to 91.01, or the lowest level since 2015.
By Friday, equity markets were nervous about the effects of the upcoming Hurricane Irma, as well as news of a big data breach at Equifax – one of the major credit bureaus in the USA.
This pushed gold to weekly highs, levels at which we have not traded since the November election in 2016.
Here is an overview of the SP500 for the week, with each red horizontal line separating a new day of the week:
Equities Steady, Oil Goes on Roller Coaster Ride
This week the markets finished with the following tally:
- Silver prices rallied 1.66%
- Gold prices rallied 1.60%
- Oil finished up 0.5%, after going up as much as 4.45%
- SP500 finished down 0.5%
- US Dollar finished the week down 1.64%
Weakness in technology stocks dragged down the broad market all week long, with the TRADEPRO FAANG Index trading down by 1.15% this week.
The bearishness pushed Nasdaq lower to close down 1.23%.
One of the weakest technology stocks was Apple, down 3.73%, on news that the company had issues with their suppliers, which could cause delays in their supply chain in the upcoming iPhone release.
Keep an eye out on Apple this upcoming week, as it can move the entire technology sector which could have a spill over effect into the overall equity market. If Apple continues to the downside, we think the entire market may take a leg lower.
Looking at individual sectors in the stock market, the tally for the week was:
- Energy sector closed up 1.27%
- Utilities added 1.02% (bearish sign)
- Retail sector added 0.92%
- Technology down 1.29%
- Financials down 2.80%
Next Week’s Economic Releases
The stock market will start the week on a quiet note, with no economic news on Monday September 11th. The day will mark the 17 year date of the tragic terrorist attack in 2001.
Wednesday we will see some producer price index for queues of inflationary pressure, along with an update on crude oil inventories. Watch oil prices, treasury prices and the US dollar throughout these announcements.
Thursday we’ll see some inflation data, which is closely monitored by the Federal Reserve. This can cause significant volatility in the currency markets and in equities as traders scramble to price in new expectations of Fed policy.
Friday we will see the latest retail sales statistics, an important sign of health for the USA as 80% of the GDP is based on consumption.
Weekly Stock Market and Commodity Sentiment
- Equities – short, sell rallies
- Oil – short, sell rallies
- US Dollar – long, buy stops to squeeze out late short sellers
- Gold – neutral, we feel it has rallied too much too quickly, will need to shake out some late longs
This week we expect to see a confirmation of yet another North Korea nuclear missile test. We have received reports that this could happen as early as Sunday morning.
Further, we are going to see quad-witch expiry by Friday, which is the simultaneous expiry of options and futures on stocks and indices.
Quad-witch Fridays have a lot of volatility and can be day traded successfully. Swing traders are often frustrated on the head fakes and whipsaws.
Institutional traders unwind their positions and re-balance their portfolios this week. We can see some heavy turbulence into the Friday close of trade.
Watch options activity and keep an eye out for levels with high open interest.
Most importantly, remember to always manage risk first and foremost, and returns will be your reward for being a risk manager.
Take care, trade well and see you in our live trading room
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The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.