Here is everything you need to know to get you ready for the trading week of October 15th – 19th, 2018.
Earnings could be what turns the tide for stocks – (Source)
- Earnings season gets underway in the week ahead, and that could help calm some of the frayed nerves in the stock market if corporate outlooks remain positive.
- Stocks bounced on Friday, and the S&P 500 landed back on an important technical level, a positive way to start the week ahead.
- Fed speakers and minutes from the Fed’s last meeting will be a big focus, after Fed Chairman Jerome Powell’s hawkish comments suggesting more rate hikes sparked a recent jump in interest rates.
Stocks fell on Friday after the release of mixed employment data jolted interest rates higher.
After the wildest market week in months, investors are looking to U.S. corporate earnings season to soothe frayed nerves in the coming week.
Stocks sold off sharply in the past week, and even with a bounce back on Friday, the S&P 500 was down 4.1 percent. A sudden jump in interest rates and worries about the impact of tariffs and trade disputes on earnings drove stocks lower, with some of the worst losses in growth stocks.
The S&P ended the week on a high note, up 1.4 percent on Friday but closing at 2,767, one point above its 200-day moving average. The moving average is a momentum measure, and it is widely watched, even beyond stock market chartists.
“The S&P 500 closed right on the 200-day. It’s just like a magnet. Everyone looks at these levels as super important, and that’s where it ended up,” said Art Hogan, chief market strategist at B. Riley FBR. “We enter next week on tenterhooks. There’s a whole lot of nervousness. … Sitting on support, rather than sitting on resistance, is always a better way to enter the earnings season.”
Companies reporting in the week ahead include Bank of America on Monday; Goldman Sachs, Morgan Stanley, Johnson and Johnsonand IBM on Tuesday; Abbott Labs on Wednesday; American Expresson Thursday and Procter and Gamble on Friday.
This past week saw the following moves in the S&P:
Major Indices for this past week:
Major Futures Markets as of Friday’s close:
Economic Calendar for the Week Ahead:
Sector Performance WTD, MTD, YTD:
Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday’s close:
S&P Sectors for the Past Week:
Major Indices Pullback/Correction Levels as of Friday’s close:
Major Indices Rally Levels as of Friday’s close:
Most Anticipated Earnings Releases for this week:
Here are the upcoming IPO’s for this week:
Friday’s Stock Analyst Upgrades & Downgrades:
Why Bulls Smile After Midterm Elections
Volatility is heating up in October, with some big drops for stocks late last week. Now let’s put things in perspective. The S&P 500 Index just had its least volatile third quarter since 1963, and it hasn’t closed up or down more than 1% for more than three months in a row—one of the longest streaks ever. Not to mention the S&P 500 has been up six months in a row, and some type of volatility or correction is perfectly typical. It might feel bad when it happens, but pullbacks are a normal part of bull markets.
“Some pre-midterm volatility could be in the cards, but the good news is that looking at the past 18 midterms (back to 1946), the S&P 500 was higher a year later every single time,” said Senior Market Strategist Ryan Detrick. This helps put in perspective just how much of a tailwind the calendar could be for investors here.
As our LPL Chart of the Day shows, the S&P 500 has been up 14.5% on average a year after all midterm elections going back to 1946. In addition, all 18 midterms saw higher returns 12 months later.
So “Sell in May” Didn’t Work This Year?
Not so fast. The answer is: We don’t know yet, the Worst Six Months (WSM) are not over yet. People forget that Sell in May is NOT the whole seasonality. Our Best and Worst Months Tactical Switching Strategies are based on the Dow’s and S&P’s Best Six Months (BSM) from November through April and the Worst Six Months from May through October, and NASDAQ’s Best Eight Months (B8M) from November through June and the Worst Four Months (W4M) from July through October.
The market’s rise from May through September was impressive, but folks forgot about October. NASDAQ just made its lowest close since May. And from our NASDAQ Best Eight Months Seasonal Sell Sign on June 21, 2018 at 7712.95 it’s down 5.0% at yesterday’s close.
The past two days have reminded everyone of October’s frightful history of crashes, corrections and market calamities. Our October Almanac points out that October is the best midterm month, but we also warned of October’s scary record.
“The term “Octoberphobia” has been used to describe the phenomenon of major market drops occurring during the month. Market calamities can become a self-fulfilling prophecy, so stay on the lookout and don’t get whipsawed if it happens…. This year is a midterm year, but the market has been resilient thus far during the Worst Months which may temper full-month October results.”
October isn’t over yet, it could still be up solidly after another fast correction, which would likely also give us a sweet Seasonal MACD Buy Signal. Sell in May is not dead, but let’s not count our gains or corrections before they are fully hatched. The Worst Six Months May-October (AKA Sell in May) are not over. Q4 2018 is not over either, in fact it’s only just begun. So there is plenty of time for the 4th quarter rally to materialize as well as the “Sweet Spot” of the 4-year cycle we have spoken a great deal about lately.
In all likelihood, the correction has a bit more to go, perhaps as deep as the correction in Q1 this year. Remember all the talk about how long we went without a 10% correction? Well welcome to a little mean reversion. That goes double for all the conjecture that Sell in May has not been working the past 5 years. NASDAQ B8M has. But nevertheless 5 years is not a cycle or statistically significant. Nine years is a little short, but the great recession low of March 2009 was a significant moment and as noted in the table below the BSM has outperformed the WSM, by a considerable margin since 2009 with more gains from NASDAQ’s Best 8 Months.
In all likelihood, the correction has a bit more to go until folks start asking out loud “should I sell?” And that should set up our Best Months Seasonal Buy Signal nicely.
STOCK MARKET VIDEO: Stock Market Analysis Video for October 12th, 2018
STOCK MARKET VIDEO: ShadowTrader Video Weekly 10.14.18
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