Commentary: Paul Ebeling on Wall Street
$DIA, $SPY, $QQQ, $RUTX, $VXX
- Earnings: 20% of S&P 500 companies have reported, 70% have beat The Street estimates
- The S&P 500, DJIA and NAS Comp held their 200-Day SMA’s Friday
- Market is concerned about the Fed overreacting, as it always does.
- China’s decline is feared, may decline further, may not
- Defensive stocks to lead, the prior leaders to test their October lows.
Most explanations for the stock market’s difficulties in here will focus on hot-button issues like the following:
- The economic slowdown in China, which registered this week when China reported its slowest annualized GDP growth (6.5%) since Y 2009.
- The increasing likelihood that a 10% tariff on $200-B of imported Chinese goods to the US will be increased to 25% on 1 January 2019, and be followed by a new tranche of tariffs on another $267-B of imported Chinese goods.
- Worries that Italy’s populist government will cavalierly ignore EU budget rules and risk inviting a debt crisis that poses systemic financial risk.
- The uncertainty surrounding the UK’s BREXIT plan.
- The uncertainty related to trade negotiations between the US and the EU.
- Geopolitical angst related to the allegations that Saudi Arabia ordered the murder of WP columnist Jamal Khashoggi [note: King Salman of Saudi Arabia has denied any involvement].
- Concerns the Fed will increase the target range for the fed funds rate too much and trigger a recession.
- The strong USD and the difficulties it poses for emerging markets and US multinational companies.
- The uncertainty surrounding the mid-term election outcome.
The above is not intended to be a comprehensive list. But, those factors have all served as headwinds for buy-the-dip strategy.
There are trillions on the sidelines waiting to see
Another factor that is not a macro factor per se is the difficulties that have been experienced by the market’s favorite, and former leadership stocks like Netflix (NFLX), Amazon.com (AMZN), Apple (AAPL), Facebook (FB), Alphabet (GOOG), Boeing (BA), and Visa(V), to name just a few, have not acted well, and rattled investor confidence.
At the end of the day there is a catch-all factor connected to the hot-button issues and the cold shoulder the momentum stocks have given investors.
We wait, we see.
Always, remember there will always be a trade.
The Bulls Vs The Bears
Investor Sentiment Indicators
The Bulls are at: 56.3 Vs 61.8 Last
The Bears are at: 18.5 Vs 18.6 Last
Support and Resistance
HeffX-LTN Major US Stock Market Indexes Technical Analysis for the Week Ended 19 October 2018
Have a terrific week