Markets Performance / Current Trading Range
- It was another volatile week on Wall Street this past week, with the S&P 500 trading between a nearly 80 point range (over 530 points for the DOW).
- The S&P 500 closed out 3Q on Wednesday (down 6.9% for the quarter – worst quarter since 2011), but finished the week in the green for the first time in three weeks, rising +1% from 1,931 on Friday 9/25, to 1,951 on Friday, October 2.
- Today (Monday 10/5), the benchmark index gained another 36 points (or +1.8%) to close at 1,987.
- Today marked the fifth up day in a row for the S&P 500, its longest win streak all year.
- While risk-on returned in equities to cap off the week, traders are beginning to seek safe havens in different industry segments and asset classes that are worth noting:
- Utilities industry sector
- Treasury market
- Commodities – deflationary/inflationary forces
Recent Trading History
- Continuing on the technical front, it has become increasingly clear that the former support levels for the S&P 500 (1,980-2,000) from late 2014/early 2015, are now acting as strong resistance for the market, as the benchmark index has failed on several occasions since late August to push above this key threshold – not to mention, still trading below the all-important 200-day moving average.
- The S&P 500 was range-bound (nearly 100 point range) for roughly three months (May-July), trading sideways between 2,040 and near record territory of 2,120, before falling convincingly below the 200-day moving average in late August.
- Volatility has increased since late August, as the S&P 500 dropped as much as -12% to a recent low of 1,867 (level last seen in October of 2014).
- 500-1,000 point intraday swings are once again occurring on a more regular basis.
Market Drivers (*Level of Importance/Weight in Descending Order/Bold Discussed in Audio Podcast)
SHORT-TERM (ST) DRIVERS:
- Federal Reserve’s Interest Rate Hike
- Continuation of Risk-On/Risk-Off
- Chinese Economy Slowing / Market Turmoil
LONG-TERM (LT) DRIVERS:
- Economic Data
- Corporate Earnings
- Currency Wars
- Global Debt Levels
- Geopolitics and Terrorism
Major Events on the Horizon
- Once again, we have multiple FED officials speaking this week, with traders again listening in for the timing of a potential rate hike:
- FOMC Member John Williams Speaks both Tuesday and Thursday.
- On Friday, we’ll hear from Dennis Lockhart and Charlie Evans.
- Also, we’ll have the FOMC minutes from September’s meeting coming out on Thursday.
- FOMC Decision on Interest Rates
- October 27-28
- December 16 (with Press Conference)
- China has been closed for the past week for National Holidays – on Wednesday (10/7) Chinese markets will reopen.
- Earnings season beginning in full force next week, but this week we’ll hear from PepsiCo, YumBrands, Monsanto, and Alcoa.
Reflationary Trade – Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes, seeking to bring the economy (specifically price level) back up to the long-term trend, following a dip in the business cycle (Wikipedia, 2015). If the Fed goes back to stimulus instead of raising rates, we could see a reflationary trade begin again, as the dollar sells off, and commodities and equities rise. This, of course, will be in the face of major deflationary global forces.
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US GDP Growth Rate by Quarter: http://www.multpl.com/us-gdp-growth-rate/table/by-quarter
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