Market Insights

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S&P 500 Overview: Further Downside Grows Likely

• S&P 500 consolidating below long-term trend line.
• Unlike Feb selloff, Market wasn’t overbought in September.
• Bearish divergence on S&P 500 in September. “False breakout?”
• S&P 500 hugging 200-day MA instead of bouncing from it.
• Sector mix is bearish as safe havens like XLU outperform (despite rising rates)
• Hard to time because of earnings, GDP. Seasonality favorable.
• Little earnings enthusiasm yet.

Don’s Earnings Watch List:

• 10/23: McDonald’s (MCD)
• 10/23: United Technologies (UTX)
• 10/24: Microsoft (MSFT)
• 10/25: Alphabet (GOOGL). Amazon.com (AMZN)

Russell’s Watch List:

• Potential bearish triangles on SMH, XLF, XLE
• Can Nasdaq-100 hold January peak around 7000?
• United Parcel (UPS) on bearish watch.
• Sprint (S) grinds higher after May 7-8 bullish call ratio spread on 10/15.

Is Goldilocks Still in the Building?

• Industrials squeezed by China trade war: CAT, AOS, GWW
• Little sign of Trump trade war ending soon. Strong economy favors punishing Wall Street, favoring Main Street.
• What happened to Honeywell (HON)?
• Railroads & suppliers fall despite good earnings. Traffic growth slows under +2%.
• Backdrop of strong employment good for workers, increasingly not good for companies. It’s also making the Fed more hawkish.
• Secular shift of economy away from retail spending on merchandise means less pass-through from wages to corporate earnings.
• Reaction to GDP on 10/26, non-farms on 11/2 could be bearish either way. Strong numbers could be hawkish. Weak numbers may trigger slowdown fears.

Calls of Note:

• “Buy the dip”: Kolanovic of JPM, Kostin of GS, Saut of Raymond James
• Wilson of MS wary of growth stocks.
• Acampora: More downside amid failed rallies.
• Fink of Blackrock: Huge outflows before recent drop.
• Jeremy Siegel of Wharton sees flat 2019 as interest rates rise.