Nov 7, 2018
Now what are we going to talk about? With mid-term elections now behind us, investors will have to find something else to worry about, and fortunately (or unfortunately depending on how you look at it), there’s no shortage of issues. Don’t forget, the FOMC kicks off a 2-day meeting today!
With the election results coming in basically just as the consensus had forecast, there wasn’t much in the way of shock in last evening’s results, although both sides are out there claiming victory (justifiably) with Democrats taking control of the House and Republicans gaining a stronger foothold in the Senate. Get ready for gridlock!
With S&P 500 futures significantly higher (+0.75%) this morning, the S&P 500 is on pace to trade back above its 200-DMA for the first time since 10/22. If it can hold above this level throughout the trading day, it will be a big psychological victory for bulls as the market looks to recover from October’s correction.
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Nov 6, 2018
US equity markets are indicated lower at the open as Europe tries to recover from morning selling. The USD is down for the third day in four, energy markets are edging higher, and precious metals are also trading green. Rates markets are generally trading higher in price, but yield moves are fractional, less than 1 basis point across the curve.
Yesterday, we highlighted the fact that despite the rally last week, the S&P 500 had not yet broken its string of lower highs and that until then caution was warranted. Well, if you are looking for an example of why it often pays to wait for a market to break a downtrend before starting to go long, look no further than emerging markets. The chart below shows the performance of the MSCI Emerging Markets ETF (EEM) over the last year. Since its peak earlier this year, EEM has had no fewer than seven rally attempts. While each one of these rallies may have seemed like a significant bounce at the time, up until this point, every single one of them has failed right at or around the 50-day moving average, establishing a lower high.
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Nov 5, 2018
After a wild week to close out October and kick-off November, US equity futures are trading pretty much flat to kick off the week. Even more surprising about the lack of movement in either direction is that overnight we heard a major speech from Chinese President Xi at the China International Import Expo in Shanghai, tomorrow is Election Day, and the Fed meets later this week!
Last week’s rally for equities in the middle of the week sure helped bulls to breathe a sigh of relief, but the market still has some more work to do before bulls can rest easy. As shown in the chart below, the S&P 500’s rally ran out of steam on Friday just shy of the 200-DMA, which is now trending lower for the first time since early 2016. Until the market can break its string of lower lows and lower highs or trade back above its key moving averages, caution is still warranted.
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Nov 2, 2018
US equity futures are surging this morning despite Apple’s (AAPL) disappointing earnings report last night. Today’s catalyst is a report that President Trump has asked his cabinet to draft a potential trade deal with China. Optimists are hoping that this will help to ease ongoing trade tensions between the two countries, while skeptics see the timing of the recent reports coming out of the White House as an attempt to goose the market ahead of next week’s midterms. If the S&P 500 can hold on to and build a little bit on its early gains today, it has the potential to post back to back to back to back one-day gains of 1% or more. The last time that happened was the last time the song “Africa” was popular – 1982!
Let’s not get ahead of ourselves, though, Non-Farm Payrolls was just released with the headline number coming in at 250K versus estimates for an increase of 200K.
With the S&P 500 already up 1% or more for three straight days, the chart below shows prior streaks of daily gains of more than 1% in the post-WWII period. While there have been about 30 prior streaks of three days, only three of those went on to four trading days.
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Nov 1, 2018
Not in many years have bulls been this happy to put a month behind them as the declines of October are relegated to the history books. November is looking to start off on a positive note, but we still have about an hour until the opening bell for the month even rings. On the economic front, its a busy day with Initial Claims, Unit Labor Costs, Non Farm Productivity, ISM Manufacturing, and Car Sales all due to be released throughout the day. Then, after the close Apple (AAPL) will headline the earnings parade. And that’s just today. Don’t forget about tomorrow’s jobs report either!
We’re never ones to turn our noses to a one-day gain of 1% in the S&P 500, but we would be lying if we didn’t say that the way the market finished up in the last hour of yesterday’s session to close out the month wasn’t a bit disheartening. After trading up as much as 2% heading into the final hour of trading yesterday, the S&P 500 moved steadily lower to close out the month and gave up just about half of its intraday gains. Just one of many examples we’ve seen recently of investors selling into the close.
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Oct 31, 2018
A number of positive reactions to earnings reports are driving the market higher to close out the month as shares of Facebook (FB) are trading up 5% and General Motors (GM) is up 8%. Strength in foreign markets on the heels of dovish comments from the BoJ and Chinese officials is also contributing to the positive tone in futures as bulls try and salvage something from what had been a horrible month for US and global equities.
Even though it looks to be ending on a positive note, bulls will no doubt be happy to see this October come to an end. While the monthly performance numbers will look a bit more respectable with the gains we are likely to see in the final two trading days, as of Monday’s close, the 20-day rate of change in the S&P 500 was one of the weaker readings we had seen during this bull market. In fact, it was the weakest reading we had since August 2015. As it always does (eventually), the market recovered from that decline in August 2015, but it was one of the shakier six-month periods that equities have seen during the current bull market. It wasn’t until February of 2016 that stocks finally made a low and began their epic run.
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