Words rarely spoken the past few years: “The market was due for a bounce back after some intense selling.” Modest selloffs Monday and Friday bookmarked 1%+ rallies Tue-Thu on the S&P 500. It’s not so much the rally during a selloff to examine as the action after the rally. So we should have a good amount of information at this time next week – bears have been so used to rallies just continuing straight up the past half decade plus so we’ll see if there is a change in nature. Aside from fixing some technical damage bulls would want to see a significant drop in volatility.
October once again struck as one of the trickiest months on the calendar for markets: The S&P 500 shed 6.9% for its biggest monthly decline since September 2011, while the NASDAQ dropped 9.2% in October for the biggest fall since November 2008.
(Far) across the pond, we mentioned the bullish “outside reversal” day a few weeks ago in the Chinese market – despite the selling in U.S. markets this reversal held up and the Chinese market looks like it has put in a short term bottom at least!
For the week the S&P 500 gained 2.4% while the NASDAQ added 2.7%.
In economic news, Monday the government announced consumer spending rose 0.4% in September, matching forecasts. Incomes rose a smaller 0.2%, the smallest rise in 13 months.
Thursday, ISM Manufacturing fell to a six month low of 57.7 vs economists’ expectations of 58.7. Still a very strong number.
Friday, the government reported job gains of 250,000 in October, beating economists’ expectations for payrolls to rise by 202,000. The unemployment rate remained flat at 3.7%, while the report showed year-over-year wage gains rising to 3.1%, slightly above the consensus estimate of 3%.
Here is the 5 day weekly “intraday” chart of the S&P 500 … via Jill Mislinski.
The week ahead…
Earnings season is slowing down but still some heavy hitters coming in. For technical traders, let’s see the nature of the bounce in duration and strength! Mid term elections hit Tuesday and China – U.S. trade talk speculation continues. The Federal Reserve meets this week and is widely expected to raise rates at next month’s meeting.
Short term: Similar stories on both the S&P 500 and NASDAQ although the S&P 500 is in a tad better shape as it’s back near a trend line that connects the major lows of 2018. However both remain below the 200 day moving average, although not far off.
This Russell 2000 is still far off from the 200 day moving average and soon enough we have the danger of the 50 day moving average crossing below the 200 day which is seen as a negative. This has been the worst performing of the indexes of the past half year, if not longer.
The NYSE McClellan Oscillator turned positive for the first time in 2 months. Let’s see if it sustains – if so that would be a positive. A bit too early to jump on that bandwagon considering the state of the indexes but we should know better in a week how to judge this.
Long term: This past week’s rally in both the S&P 500 and NASDAQ helped push them to/near some support trend lines. Again – next few weeks will be interesting – if markets reverse back down that will mean a clear break of very long term support lines and mark a stark change in character. If indexes rally, we’ll be back to business as “usual”.
Charts of interest / Big Movers:
Monday, Red Hat (RHT) jumped 45% after IBM said it would acquire the open-source software company for $190 a share in a cash deal.
Tuesday, General Electric (GE) sunk 8.8% after it slashed its dividend and reported disappointing third-quarter results but announced a restructuring of its power business. The rest of the week didn’t go too well either!
Blast from the past Akamai Technologies (AKAM) surged 17% Tuesday after the firm beat third-quarter estimates and raised its fourth-quarter guidance and full-year outlook in an earnings release Monday evening.
Under Armour (UAA) jumped 25% after the company announced third-quarter earnings and revenue that beat analysts’ estimates.
Wednesday, General Motors (GM) jumped 9.1% after third-quarter earnings and revenue came in above expectations.
Thursday, Wynn Resorts (WYNN) soared 12% following an SEC filing that indicated that the firm will take out a $500 million loan that will be used in part to buy back stock.
Friday, Apple (AAPL) sunk 6.6% after the tech giant posted results that were better than expected but disappointed on its outlook. It also said it would no longer disclose unit sales of its products for investors, as it has for more than a decade.
Starbucks (SBUX) rallied 9.7% Friday after the firm posted same-store sales growth of 4%.
GoPro (GPRO) shares tumbled the most in almost 10 months Friday, after giving an outlook for sales in the holiday period that missed analysts’ estimates.
Have a great week and we’ll see you back here Sunday!