U.S. equities mostly inched their way forward this week, digesting another rate hike of .25% by the Federal Reserve. In fact, after the hike, rates dropped and equities rallied. The dollar dropped as well.

Metals, especially gold and copper, ended the week strong after being under pressure for the past month in anticipation of the big event.
Keeping things in perspective, short term rates are now at .75%, historically low. Generally, to choke off bull markets short term rates are usually around 3%.

As long as there are no jolts from the Fed, we have plenty more room and appetite for increases. That is, of course, as long as one does not factor in the unprecedented level of overall debt or our ability to absorb such increases before the cost of interest chokes off productivity.

On the Trump front, after what at the onset seemed to be a reasonable meeting with German Chancellor Merkel, things deteriorated when the normal protocol of handshake after a head of state meeting between two allies was not to be.

As I am writing this, Trump just tweeted that Germany is not paying its fair share of NATO’s expenses. This will ratchet tensions up another notch or two. This is a complicated issue with many nuances, and of course it will not be resolved with a simple sound bite.
Market Internals improved a bit this week, but a few ominous signs are still lingering in the ether.

Considering we are just lingering off all time highs in the S&P 500 and the Nasdaq 100, the deterioration the New High/ New Low indicator is worth noting as the breath is getting narrow.

Another worrisome development is that utilities have been performing better that the S&P 500. For a detailed explanation and review of this important development watch this week’s video.

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