The Stage For A Strong Autumn Rally In Stocks Is Set

Commenting on today’s trading Gorilla Trades strategist Ken Berman said:

Autumn Rally In Stocks

mohamed_hassan / Pixabay

Today’s session was just what bulls needed to get a confidence boost following three tumultuous weeks. The stock market once again proved bears wrong today, as even though there were more than enough reasons for equities to decline, the major indices closed the day near their intraday highs, and investors now can realistically expect new all-time highs in the coming weeks.

Get The Full Series in PDF

Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q2 hedge fund letters, conference, scoops etc

Investor sentiment quickly turned positive today despite yesterday's scary dip in Europe, and since fundamentals hadn't changed, the rebound proved that investors are still ready to buy the dip in the face of the mounting global risks. The better-than-expected earnings reports by Lowe's (LOW) and Target (TGT) helped the early rally in stocks, and the outlook for the consumer sector remains bright. The reports also confirm the healthy growth in the consumer sector, which, together with the continued earnings growth, could serve as the basis of the next leg higher in the bull market.

The FOMC meeting minutes were a mixed bag for bulls as although the members of the committee confirmed Chairman Jerome Powell's 'midcycle adjustment' narrative regarding the July rate cut, the Central Bank’s stance seems flexible enough to deal with risks posed by the trade war and the global economic slowdown. Despite an initial dip in the wake of the release, the major indices held on to most of their early gains, and that bodes well for the rest of the week even as the Fed and especially Mr. Powell could still surprise the market in Jackson Hole but in light of the negative global developments, it's unlikely that the Central Bank will shock investors.

Despite yesterday's risk-off shift, which was triggered by the Italian political crisis had the potential to turn into a larger-scale sell-off, domestic stocks remained remarkably stable, confirming the underlying bullish trend again. This month's pullback might have set the stage for a strong autumn rally in stocks, especially should the trade talks finally take a positive turn. President Trump addressed the ongoing trade spat with China today, stating that a deal is still likely and that the U.S. will be the winner of the negotiations.

Traders will be in for the busiest day of the week, in terms of economic releases, but the Fed’s symposium in Jackson Hole could steal the show. Even though Chairman Jerome Powell is scheduled to speak on Friday, we could already get a hint of what’s ahead tomorrow. The Markit manufacturing and services PMIs will come out just after the opening bell, but the pre-market session might already see considerable moves in stocks and bonds. The Eurozone PMIs and the European Central Bank’s (ECB) policy meeting accounts will be released before the U.S. session, and analysts will focus on the struggling manufacturing sector.

The major indices all bounced back following yesterday’s broad sell-off and thanks to the continued strength of the tech sector, all of the key sectors closed the day in the green. The Dow was up 240 or 0.9%, to 26,203, the Nasdaq gained 72, or 0.9%, to 8,020, while the S&P 500 rose by 24, or 0.8%, to 2,924. Advancing issues outnumbered decliners by a 2-to-1 ratio on the NYSE, where volume was slightly below average.



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver