Disconnect

Equity markets had a pretty solid pull-back last week.  The question is why?  Is there a fundamental shift in the economic data?  Profit taking?

It may have been a derivative of the ‘Trade War’ with China.  China has threatened to sell off $3B or so of US Treasuries.  Assuming this is credible, the front running of this decision could explain the move in the 10-year treasury.

While stocks and bonds are supposedly not highly correlated, that relationship is not always true.  Last week’s price action seemed the opposite certainly.  The question is, will this persist?

The technical action in the SPX is a bit early to call.  The next line in the sand to watch is the 2877 level — the 50-day moving average.  Beyond that and we get into more material pull-back areas closer to 2800.  The 2900-level provided little resistance last week as the SPX fell below this support area.

So, for now at least, we wait and watch.  It’s a tale of 2 levels.  Will the SPX retreat to the next major support level at 2800?  Or will it find footing near the 50-dma and begin the climb back toward 2900 and beyond?  Historically speaking, October, despite some key outliers, it usually a positive month for the markets (as is Q4 in general).  While the bias for the next day or two may be negative, we’ll see if this is just a trader’s blip, or something more significant.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.