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Keep Your Eyes On The Fed

The SPX may be in a sideways pattern, but the short-term momentum has shifted to the positive. Now all the analysts come out of the woodwork to try and explain why. Here’s the simple thing to do:

Watch the Fed.

If the news cycle isn’t going to change what they’re doing, odds are, the market shakes it off in short order and resumes its current trend.

This trend is not on fire. It is not likely to spike higher in the near future. No, it’s likely to keep grinding higher and higher — likely to and through all-time-highs — as the year moves on toward 2020.

Why? Because the macro story is unchanged. And we’ve beaten the drum enough — still in expansion, growth slowing, international growth slower than US growth, international rates negative, US rates ultra-low. All of this still forces money into the more conservative pockets of the US stock market – which creates a bid that keeps things from breaking down too quickly.

It’s still a TINA story — there is no alternative — and until we have a reason to change, we’ll press on.

Look for the SPX to challenge — and likely close above — the 3000 level for the week. Support is at the 100-day moving average around 2915. Any trading above this range is simply… ‘normal.’

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.

Technical Outlook Still Unclear

While the long-term trend support seems to be in place (around the 200-day moving average), the intermediate-term numbers are all over the place.

This week is an interesting set-up.  The futures over the weekend are indicating a strong positive open for the week.  And over 1000 companies report earnings this week.  This, paired with very little Fed activity, should make for a decent backdrop for the markets.

Looking at the technical data, it’s a tale of two markets.  One market has the SPX running back to over 2825 this week.  The other has the SPX failing down to about 2675.  The volatility range looks like it could be quite high this week.  The bias, fortunately, appears to be positive.

The last several weeks have taken a lot of the wind out of the sales of this market.  While it doesn’t appear a full-blown bear is yet upon us, the BigFoot database has now fallen from the mid-70’s in terms of percent long, to low 50’s.  This is a meaningful shift.

On the one hand, money has been in motion, so some new opportunities should arise.  On the other hand, money has been in motion, and there’s clearly a shakeup.  Tech, in particular, has taken a hard hit in October.

Given that all three macro indicators remain positive, the backdrop for a major decline still hasn’t materialized yet.  Once the elections are over perhaps the markets can get a better idea which direction they’d like to commit.  For now, look for continued volatility, with a positive bias for the week.

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.

Taking out the 2018 Highs May Be Tough This Week

The wind has been in the sails for a few weeks now, and the S&P500 is close to reclaiming the highs for the year.  The trade wars have shown little effect on the domestic market’s rise… until Turkey made the headlines.

The instability seems to have thrown a wet blanket on the market’s climb.  What is unclear is whether or not this is a sign of something more significant to come.  Turkey, as an economy, is relatively small.  And, while larger than Greece, it has its own currency instead of the Euro.  This makes the situation different than the Greece crisis which threatened to European Union more.

Given the market’s current behavior, issues with Turkey look more like a speed bump than a change in course.  Still, the concern of a strengthening dollar slowing down economic growth could make the Fed’s rate decisions more challenging.

Over the weekend the S&P futures declined to the 2820 level before recovering to what looks like flat levels for the open.  The concern will be if the larger market re-tests these overnight levels.  Any negative news that spooks things could be a pretty good indicator things will re-test near these lows looking for support.

Given the new uncertainty in Turkey, paired with the Fed’s current course of rate hikes, it looks like this week could be more of a sideways trader.  The low for the range is probably around 2820 for the SPX — with an extreme of 2800. A breach of this level would be viewed as problematic by most traders.

On the up-side, the story is still about trying to take out the highs for the year.  If the SPX manages to breach the highs for the year intra-day, that’s a good sign.  But the real trick is getting a close above the high for the year.  And if we close the week out above the highs for the year (probably unlikely this week), that gives a green light for the next leg higher.

Overall, the bullish technical trend remains in place.  Just don’t be surprised if this week trades a little flat-to-negative as the markets sort out what’s happening with Turkey and determine whether or not contagion is likely (which it probably isn’t).

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.

Tech Shift

The big news last week was the 20% drops for both Facebook and Twitter.  The entire tech sector seemed to catch a cold last week.  But here’s a little perspective:

Both Facebook and Twitter had been on phenomenal runs for the year (with Twitter nearly doubling).  Both companies are reinventing their privacy rules.  And both companies are taking on the ‘fake news’ problem.

In short, both companies are modifying their business models — and the impact is significant enough to warrant a re-evaluation by analysts.  This appears to be what the markets have done – re-evaluated pricing, and adjusted down for the short-term as these giants figure out how to deal with these new challenges.

Does this contagion spill over to the entire market?   A little… particularly because Facebook has grown to a point that it has a material impact on indexes.  But does it indicate a systemic problem?  Probably not (but we’ll see).

From a technical perspective, the major indexes were still pretty high.  The SPX was reaching over-bought territory again heading into its fourth week in a row of gains.

So now what?

It looks like the SPX has backed off from its over-bought status.  Now some key levels will be tested, as overnight futures dipped over the weekend before recovering into Monday’s open.

Look for the trading range of 2800 on the low, and 2850 on the high, to be tested this week.

There are a lot of big names to report earnings this week.  If the profit numbers are solid, we probably see this market grind higher.  It’s still fighting some political headline risk.  But the overall backdrop is still stock-favorable.

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.

Is this Pull-Back Nearly Complete?

Futures indicate a lower open on Monday for the SPX.  It’s been tough for large-caps lately given the loud shouts of ‘Trade Wars’ from media outlets.  It’s still quite unknown as to what may really happen there.  Some winners and losers will definitely get tossed around, but will the overall markets be harmed?  It’s too early to tell.

While pull-backs are not fun, this thing has played it by the numbers.  If the futures are any indication, the SPX will declined back to the mid-point of it’s 1-month (or so) trading range.  Once there, we’ll see if things stabilize and begin climbing higher.  The underlying fundamental story supports further upside from here.

For the week, look for 2740 as a key support/pivot point.  If the SPX holds up here, a reversal move back toward the 2800 level is likely.  If support fails, look for 2718/2700.

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.

Hurry Up and Wait

So we wait… until the Fed goes ahead and raises interest rates again.

The news cycle will be pushing trade war talks or currency shifts or commodity pricing.  But the story is still the Fed.  Do we have enough news — globally — to keep the Fed from hiking rates again?  Probably not…  the low unemployment number is getting hard to ignore.

Don’t take your eye off the ball though.  The story is about the cost of capital.  The narrative may begin to shift as investors ask when the bull market ends, but there’s probably some delay in that process.  For now, M&A activity and consolidation is should keep happening until rates rise to the point it looks less attractive.  The rest of the noise in this market is mostly relevant because folks are trying to figure out how Fed policy will evolve and what it will mean.  But the Fed is still the elephant in the room.

For the week, look for a sideways market with the SPX hanging out between about 1700 and 1750 or so.  Futures look to be opening positive, but the move still appears measured.  For traders out there, looks like more volatility to enjoy.  For investors, looks like more hurry up and wait…

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.

 

What if Earnings Aren’t Enough?

The theme that’s starting to permeate this market is “what if earnings aren’t enough?”  So far the SP500 has, on average, exceeded Wall Street earnings estimates by around seven percent.  Yet stocks, after beating estimates, haven’t popped.  In fact, it seems the downside penalty this season has been about three times harsher than the upside reward a company receives for an earnings beat.  So what gives?

One theory is that investors are starting to look further down the road as far as earnings go.  Will earnings keep climbing, or was last quarter the end of the good news?

Another theory is that markets are still highly valued on a multiple basis even with the higher earnings.

Both may be true.  The technical signals are a mixed bag right now.  While support for the SPX has held up around the 200-day moving average, so far the index has failed to reach escape velocity and break out above the 50/100 dma’s.  In fact, the 50dma is currently below the 100dma.

These mixed signals, unfortunately, give little indication the market is going to break out to the high side — even with the strong earnings season.  It seems the focus has shifted to ‘everything else’ as investors remain uncomfortable with wear we are deep in the bull market cycle.

Interestingly, the base case from the beginning of the year — with a minimum price target of 2890 — is still on the table.  Some analysts have started to downgrade their expectations for the year though.  2890 is pretty low compared to many estimates out there (to be fair, our ‘minimum’ price target isn’t what’s expected.  We have a more likely target of 2940 on the chart as well – and several projections that were over 3000).

Since last week was a complete wash (SPX opened at 2670.10 and closed at 2670.14), the key for this week will be to see if we trade outside of last week’s trading range.  This puts the low at 2660 and the high at 2717.  A daily close above or below either of these levels would be an indication of directional bias (though a break-out to the high side would be more significant — a drip below 2660 just means we could test the 200dma again).

The markets are still in search of a catalyst.  Until something changes, look for the sideways trend to continue.

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.

Some Algos Are Finding New Buys Out There

While the needle hasn’t exactly moved much, the bleeding seems to have stopped for now as the BF database crept ever-so-slightly higher toward the long side over the weekend.  The move itself is not all that statistically significant.  The fact that the declines stopped may be however.

For now, the trading range has not been broken.  But futures point to a higher open signaling the potential for things to break above the 50-day moving averages.  From a technical perspective, this would indicate the market could be picking up momentum and looking to break-out to the high side from here.

Before you get too excited though, you might want to pump the brakes.  Geopolitical tensions remain high right now – especially with the recent shelling of Syria by the US.  This may further strain relations with Moscow.  It’s not necessarily a direct economic concern given the over-supply of oil right now.  But it’s a wild card as to what they may do and how that impact could ripple through to other players.  It’s the uncertainty factor the markets hate.

As Earnings Season gets into full swing the markets will likely be paying close attention to both earnings AND guidance this round.  Strong guidance will be important.  Also, keep your ears open for any indications of slowing global economic growth.  The story has been a global coordinated recovery for a while now.  Any signs that the recovery is getting shaky could lead to more uncertainty for this market.

Bottom line, while the story for a higher market is still in place, the wrong sequence of events could spook things and lead us lower.  As of now, the trading range between 2600-to-2700 remains for the S&P500.  The 200-day support and 50-day resistance levels continue to move closer to each other.  As they do, it’s likely the 50-day resistance will fade.  A breach of the 200-day support may still be viewed as problematic though.  More to follow on that one IF we breach that level (currently at 2599 — so we may as well call it 2600 for our purposes).

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.

Will the 200-day Moving Average Hold Support for the SPX?

Last Friday’s market fail was technically disappointing as a the week ended lower.  The 200-day moving average (currently at 2593) barely held up.  In fact, it was breached intraday last week.

The technical set-up is now in messy territory.  On a day-over-day basis, it looks like the 200-day moving average is holding up as support.  However, on a week-over-week basis, the data is less conclusive.

It appears a significant area of support is setting up at the 2585 level.  That was the previous low mark in the current pull-back.  It is also barely above the 2582, which is the current tipping point for the Market Macro Indicator.

While the futures markets have been higher over the weekend, the talk about trade wars continues to escalate.  It seems unlikely both China and the US would cut their noses off (economically speaking) to spite their face.  So this is likely more about rhetoric and negotiation posturing.  But it’s certainly got the markets spooked.

More importantly, the futures markets seem to do little to point out the future these days.  Other than confirming the immediate trend in the markets — and perhaps providing some insight into the extreme highs and lows in the trading day — there seems to be less correlation between the futures and the market than in prior months.  So take the data with a grain of salt.

The 200-day moving average appears to be the place to watch.  If that holds, it looks like a trading range between 2600 or so on the downside, and 2700 on the upside until earnings season gets rockin’ in another week or two.  If earnings continue to shine, the uptrend can resume (as long as tariff talks moderate).  If not…   well, let’s not borrow trouble just yet.

For now, the algo database has shaved another point off, dropping to 28% long.  The marcro’s are holding steady and remain long.  One thing’s for sure, it ain’t boring!

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.

50-dma Fail

If the futures markets are any indicator, then it looks like the 50-day moving average for the SPX is going to fail on Monday morning.  While this is not in and of itself a catastrophic sign, it’s disappointing as the recovery wave of this trend may be failing.  Intra-day the SPX managed to publish both a higher high and higher low for last week.  Still, the Monday open appears to be pretty sloppy.  It looks like about a 0.5% drop out of the gate.  And, if history is any indicator of how things will go, we could see follow-through on the trend that moves the trend even lower.

With the open dropping below the 50-day moving average (at 2748), the nest line in the sand will be 2700 — or the 100-day moving average at 2685.

Even if the markets test the 2685-support range this week, it does not mean the bull market is officially ‘dead’ or anything drastic.  The speed and aggressiveness of how the market seeks this level could come into play though.  A very aggressive drop this week could spook investors.  If so, we may be looking at a re-test of the market lows, and a more material correction period.

More likely, the markets will continue to be volatile, and we’ll trade in a sideways pattern with a point range between 1700 and 1850 for a while until some kind of shift in economic data gives investors a reason to commit more seriously to a direction.  Until then, it’s the an obnoxious Goldilocks market — neither too hot nor too cold to break out of a sideways trend.

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.