Commenting on today’s major indices like the S&P 500 Gorilla Trades strategist Ken Berman said:
Despite the busy day in terms of politics, economic releases, and earnings, volatility remained muted in stocks, and that suggests that bulls remain in control of the market. While the Brexit sage is far from being over and the Philly Fed Index and industrial production both seem to confirm the sharp slowdown in manufacturing, today’s session was a perfect example of the quiet consolidation that is a key hallmark of healthy bull markets.
Q3 2019 hedge fund letters, conferences and more
The major indices finished slightly higher today following the second very choppy session in a row, as investors welcomed the Brexit deal between the European Union (EU) and the U.K. The Dow was up 24, or 0.1%, to 27,026, the Nasdaq gained 33, or 0.4%, to 8,157, while the S&P 500 added 8, or 0.3%, to 2,997. Advancing issues outnumbered decliners by an almost 3-to-1 ratio on the NYSE, where volume was well below average.
Even though the earnings season is heating up and we had important economic releases to ponder today, global politics clearly stole the show. The announcement regarding the Brexit deal boosted risk assets in pre-market trading, but as it was the case with the agreement that former British Prime Minister Theresa May struck with the EU, the British parliament has to approve Boris Johnson’s deal as well. British lawmakers already expressed their doubts regarding the deal in the few hours since the formal announcement, and that could mean that Saturday’s vote will be a huge risk for financial markets.
Brexit focus
It’s no surprise that British assets had a very volatile day, but the mood remained upbeat on Wall Street, with the help of the, so far, bullish corporate earnings. All of the key sectors finished the session in the green, even as IBM’s (IBM) disappointing quarterly report weighed on some parts of the tech sector. Consumer goods, industrials, and services all outperformed, and bulls were glad to see that small-caps finally had a very strong day as well, with the Russell 2000 hitting its highest level since the first session of the months.
The domestic economic calendar will almost be empty tomorrow, since only the CB Leading Index and the Federal Budget Balance will be released. That said, we could be in for another busy pre-market session due to the key Chinese releases, and the looming Brexit vote in the British parliament. The Chinese quarterly GDP print, retail sales, and industrial production will all come out overnight. All eyes will be on the struggling Chinese yuan, as the currency has remained weak in the face of the positive trade developments, which points to further weakness in the country’s economy.
A few key earnings reports, especially the ones of American Express (AXP), Coca-Cola (KO), and Schlumberger could also cause wild swings in equity futures before the opening bell. Coca-Cola is having a blowout year, so far, despite the pullback of the past couple of months, outperforming the large-cap indices by a wide margin. Since the company is considered recession-proof by a lot of analysts, the stock could be ready to take off again in the wake of tomorrow’s release, should the firm’s revenue recovery continue.
Major indices focus on economic data
The technical picture remains positive across the board, as the two quiet sessions cemented the gains of last week’s rally. The major indices benchmarks are still well above their rising 200-day moving averages of 7,787 for the Nasdaq, 2,863 for the S&P 500, and 26,037 for the Dow. Thanks to the quick recovery from the recent sharp pullback, the indices are all back above their now rising 50-day moving averages of 2,944 for the S&P 500, 8,000 for the Nasdaq, and 26,520 for the Dow as well.
The last time the major indices hit new all-time highs, a bit over two months ago, stocks were after two very strong months, meaning that they were ‘overbought’ according to several technical measures. In August, equities turned volatile, but while we saw two scary pullbacks since then, the major indices are currently just below their record highs. Thanks to the sideways price action in the past couple of months, the technical indicators are no longer showing overbought readings, and that could mean that we are finally in for a sustained move to uncharted territory in the coming months. Stay tuned!
