Market at a Glance - 10/31/2019

By: Christopher Mistal

October 31, 2019

Fundamental: Soft. Q3 U.S. GDP came in at 1.9% which was better than expected. This confirms that the pace of growth has slowed, and it confirms that the economy is still growing. Broadly, corporate earnings for Q3 have been better than forecast even though they could still show a year-over-year decline once earnings season ends. Employment remains firm with continued gains, but the pace of gains has slowed.

Technical: New Highs. S&P 500 logged two new all-time closing highs this week. DJIA and NASDAQ are lagging. Positive cumulative advance/decline lines and a series of higher lows support the case for a possible breakout in the near future.

Monetary: 1.50-1.75%. The Fed cut rates by 0.25% at its October meeting and signaled that this may be the last cut unless there is a material change in their outlook. As a result, the odds of a December cut have fallen over the past week. The Fed does appear ready, willing and able to respond should conditions weaken further.

Seasonal: Bullish. November is the first month of the “Best Months.” November is also the first month of the best three consecutive month span, November through January. Since 1950, November is the best month of the year for S&P 500 and second best for DJIA and NASDAQ. However, November has been weaker in pre-election years.

Psychological: Optimistic. According to Investor’s Intelligence Advisors Sentiment survey, bulls are at 54.2%. Correction advisors are now at 28.0% and Bearish advisors are just 17.8%. Overall sentiment has improved for three weeks in a row after a brief retreat in response to market weakness in late September. With the holiday season rapidly approaching, it is not uncommon for sentiment to rise and remain elevated as expectations for a yearend rally and a new year build. If sentiment begins to retreat, it would be worrisome.