Market at a Glance - 10/28/2021

By: Christopher Mistal

October 28, 2021

Fundamental: Decelerating. According to the just released advance estimate of Q3 GDP from the BEA, growth slowed to just 2%. This is the slowest gain since the recovery began last year and was well below estimates. September’s jobs report was similarly disappointing and well below expectations earlier this month. Two bright data points thus far are solid corporate earnings numbers and steadily falling initial weekly jobless claims.

Technical: Breaking out. Our Seasonal MACD Buy Signal triggered on the close on October 8. DJIA, S&P 500 and NASDAQ have all broken out to new all-time closing highs. Russell 2000 has not. Weekly New Highs are bullishly trending higher while Advance/Decline lines are improving. Seasonal forces may aid the market with a sustained move higher into yearend.

Monetary: 0 – 0.25%. Next week the Fed will meet, and they are widely expected to transition from taper talk to taper action. Given current elevated inflation readings and softening growth, the Fed may be challenged to achieve a balance that adequately addresses both issues while keeping the market satisfied. We believe the Fed will announce a tapering strategy, but the pace is likely to be slow and data dependent.

Seasonal: Bullish. November is the first month of the “Best Six Months” for DJIA and S&P 500 and NASDAQ’s “Best Eight Months.” It’s also the first month of the market’s best three consecutive month span, November to January. November is the best S&P 500, Russell 1000 and 2000 month of the year. Second best for DJIA and S&P 500. In post-election years average performance improves modestly compared to all years.

Psychological: Improving. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors have climbed to 48.9%. Correction advisors have retreated to 27.3% while Bearish advisors stand at 23.8%. Bullish sentiment bottomed in early October when correction sentiment had swelled to 37.10%. The difference between bulls and bears also shrunk to its lowest level since the pandemic began in early October and has begun to rebound. Overall sentiment remains marginally neutral but is likely to shift as the market continues to climb higher.