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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.
