News:
What a ride!
Markets were practically flat heading in the CPI inflation data release.
The numbers came out hotter than some Wall St estimates. According to the report, consumer prices increased 0.4% month over month and 8.2% year over year.
As soon as the numbers came out, the markets collapsed.
By the opening bell, majors indexes were off by about 2% each.
And that’s when the selling stopped.
Investors went on a buying spree the rest of the day. And the indexes all close dramatically higher.
- Dow Jones +2.8%
- Nasdaq +2.2%
- S&P 500 +2.6%
- Russell 2000 +2.4%
The Dow and S&P 500 swung as much as 5% intraday.
Sector Round-Up
All 11 sectors ended the day higher. At the top…
- Financials (XLF) +4.1%
- Energy (XLE) +4.1%
The weakest sectors were consumer based.
- Consumer Staples (XLP) +1.7
- Consumer Discretionary (XLY) +1.1%
It’s worth noting that according to the CPI report, when adjusted for inflation, worker wages are down about 3% year over year.
Technicals:
The market is trying to bottom.
Last time we saw such a dramatic intraday swing was February 24, when Russia invaded Ukraine.
The S&P 500 rallied about 12% over the next month.
Yesterday’s huge green candle was a clear signal that the current inflation levels have been priced into the market.
Our other signals…
- The VIX remains stubbornly high
- RSI levels are neutral
- The Put-to-Call Ratio is neutral
Timing:
Markets are exciting for earnings season.
The financial sector was the top performer yesterday. This morning we’ll get the first look at Q3 earnings.
Several big banks report before the opening bell.
- JPMorgan Chase (JPM)
- Morgan Stanley (MS)
- Citigroup (C)
- Wells Fargo (WFC)
- PNC Financial (PNC)
A Perfect Record
October is an important month for stocks.
As we discussed in the monthly outlook, it’s a bear killer. More bear markets have ended in October than in any other month.
And October is also the start of the “best six months.”
- Since 1950 in mid-term years, this period has ended higher 18 of 18 times.
- A perfect record.
- 100% accurate.
- The average return is 15%.
Stocks are a screaming buy as far as we are concerned. We added to our seasonal positions during yesterday’s dip and will likely be fully invested by the end of the month.
Watchlist:
*Low Float
^Open Position*HAPP is on watch
*PEGYsupport at $5
*^RELL support at $18
*RVPH on watch
*WNW on watch
FNGR support at $8
HROWresistance at $13, support at $11
IMUX on watch
ETNB support at $7.50, resistance at $8.50
IMVT support at $9, resistance at $10
DCPH support at $17
VIST support at $11
ADEA support at $9
HLIT support at $13