Market at a Glance - 10/26/2017

By: Christopher Mistal

October 26, 2017

Psychological: Frothy. Good news is good news; bad news doesn’t matter as the biggest fear appears to be the fear of missing out. This fear has sent Investors Intelligence Advisors Sentiment survey bulls to 62.3%, bears down to 15.1% and correction camp has shrunk to just 22.6%. The percentage of bulls is in the danger zone and so is the spread between bulls and bears. This historical bull market likely has further to go, but an interim top could be forming.

Fundamental: Stalled. Growth in Q3 will likely be in the 2-3% range when the first report is released tomorrow morning. Anything less and hurricanes will take the blame, anything more would be a surprise. Employment, or the headline unemployed number, has likely bottomed. Any further improvement will likely come from an expansion of the workforce. Corporate earnings have been solid. Tax reform, done fairly and correctly, could give the economy a long-term advantage, but specific details still remain unknown.

Technical: Toppy. Stochastic, relative strength and MACD indicators applied to S&P 500, NASDAQ and Russell 2000 have rolled over and turned negative. DJIA is the remaining holdout and could succumb at any time. Advance/Decline lines have also rolled over. A mild pullback along the lines of what transpired from mid-July to mid-August is not out of the question.

Monetary: 1.00-1.25%. Next week on Halloween the Fed will meet again. No tricks or treats are currently anticipated. CME Group’s FedWatch Tool is showing nearly no chance of any change in rates. The biggest question that remains is who will be the next Fed Chair. It may not really matter in the short-term as rates are still historically low and monetary policy remains highly accommodative in the U.S. and globally. Plenty of liquidity is available to fund stock buy backs and dividend increases.

Seasonal: Bullish. November begins the “Best Six Months” for the DJIA and S&P 500, and the “Best Eight Months” for NASDAQ. November also marks the beginning of the best consecutive three-month span November-January. Post-election year Novembers are solid ranking near the top across the board. Our Seasonal MACD Buy signal can trigger anytime now. An email Alert will be sent after the close when it does trigger.