Commentary: Paul Ebeling on Wall Street


SPECIAL REPORT: The Future of this Rally, what is Next?

Thee DJIA futures are up a bit Sunday night, along with S&P 500 futures and NAS Comp futures.

This stock market rally has stood negative headlines, but is not yet making a final push to record highs.

Arguably, this leg of Bull market rally still has not confirmed a new or renewed secular Bull market.

Stock market leadership is in flux will it be momentum or value that champions the rotation. I say value fades and momentum continues to lead.

DJIA futures have been steady in recent days, but stock market opening gains or losses have also reversed direction intra-day frequently.

Over the weekend, US and Chinese officials said China trade talks are going well. Chinese officials said a farm trip to Montana was cancelled to avoid a media circus, not a sign of faltering negotiations, and you did not read that anywhere. High-level China trade talks are set for early October.

Crude Oil futures rose modestly. Saudi Aramco says full production capacity will return by the end of November, with Saudi output hitting pre-attack levels by the end of this month.

SPDR Sector ETFs: Intraday % Chg

  • Health Care XLV0.14%
  • Utilities XLU-0.37%
  • Materials XLB-0.73%
  • Energy XLE-0.83%
  • Communication Services XLC-0.88%
  • Consumer Staples XLP-0.9%
  • Real Estate XLRE-1.09%
  • Financials XLF-1.09%
  • Industrials XLI-1.16%
  • Information Technology XLK-1.47%
  • Consumer Discretionary XLY-1.47%

This stock market rally ran into headwinds last week, with spiking Crude Oil prices, China trade news and mixed Fed messages. But major indexes did not lose too much ground. 

The Dow Jones Industrial Average fell 1% last week, while the S&P 500 index slid 0.5% and the NAS Comp – 0.8%.

Among the best ETFs: the Innovator IBD 50 ETF (FFTY) rose 1.8% while the iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.3%. But software and other big Y 2019 winners are well off their highs.

The VanEck Vectors Semiconductor ETF (SMH) sank 2.4%, a setback for chip stocks that had been breaking out and/or looking at buy points.

Again, the DJIA today is less than 2% from a record high. The S&P 500 index and NAS Comp are close too. But recently when the major averages have moved toward those 26 July high, but they closed low in the day’s range or reversed.

While the major indexes hit new highs from the late Y 2018 stock market correction in, they have never risen beyond those year-earlier marks. Instead, the indexes have marked above all-time highs, and pulled back.

The Big Q: Is this leg of the stock market rally the start or renewal of a long-term secular Bull market?

The Big A: The major indexes will need to convincingly clear consolidations going back to 2018 to be sure.

In Y 2018 and 1-H of Y 2019, software was clearly leading the stock market rally. But they began to stall, then break down, then collapse. As software melted, along with payments, restaurants and other Y 2019 stock market market darlings, stocks with low-to-average PER’s (price-earnings ratios) came to fore this month. That is OK, market leadership changes, sector rotation is normal, if not always happy stuff, but we always take what the market gives, Yes?

But many of the current leaders are struggling in here. This could be temporary, but it is discouraging to have a stock market rally, near record highs, with just a few winners.

The biggest reason why growth/momentum stocks tend to outperform value is earnings and earnings expectations drive share prices.

Some financial stocks have been getting a boost from better economic data and the resulting bounce in US Treasury yields. But the 10-year yield pulled back below its 50-Day MA line, a Key resistance area for the past 10 months.

The Big Q2: What is Next for this Market Rally?

The Big A2: In 1 scenario, the stock market rally powers ahead, hit new highs in a convincing and sustained manner. Stalling breakouts would likely revive and the true leading stocks and sectors become clear. Or the market could falter again with recent breakouts failings on negative headline reactions.

But, while in this sideways/consolidation action, with leadership and breakouts in flux, it is tricky business for active traders. So, many are sidelined and in cash waiting for confirmations.

Many investors want to take part in the stock market rally, but prudence is Key, as there will always be a trade.

Also may be a good time to have a diverse group of leading stocks, so you are not too exposed to a specific sector.

Plus, do not forget the importance of gold in a balanced portfolio, experts recommend 10-15%.

Friday’s Close: DJIA -159.72 at 26935.07, NAS Comp -65.20 at 8117.67, S&P 500 -14.68 at 2992.11

The stock market ended the week on a lower note after a mid-day pause pressured the S&P 500 (-0.5%) into the Red. The index lost 0.5% on the week, the NAS Comp (-0.8%) underperformed, surrendering 0.7% since last Friday

Volume: trade on the NYSE came in at 2.76-B this 3X Witching Friday

  • NAS Comp +22.3% YTD
  • S&P 500 +19.4% YTD
  • Russell 2000 +15.6% YTD
  • DJIA +15.5% YTD

Heffx-LTN’s overall technical outlook for the major US stock market indexes is Neutral to Bullish for the week ended 20 September 2019

It is your money, and so, your responsibility.

Have a terrific week.

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