September 25, 2016
Weekly Market Outlook
By Keith Schneider
The long awaited and much debated will she or won’t she was finally decided this week and for now markets pretty much liked what the Fed did which is nothing.
Key US Equity Indexes ended up about 1% with the NASDQ 100 making new all -time highs. The S & P 500 regained the much watched 50 day moving average after the Fed announced nothing.
However, by Fridays close the SPY retreated back under the 50 day moving and to a warning phase. The outcome of Monday’s presidential debate hangs over the market and no doubt is contributing to the see/saw action.
The mix of conflicting data continues to mount. Market Internals and sentiment indicators improved this week but strange anomalies continue to show up.
For instance, the new high/low ratio has fallen sharply even as the NASDQ makes new highs. Another anomaly was that one of the strongest sectors this week was Utilities which is generally seen as a safe haven not a favored sector when equities hit new highs.
The SPY/XLU risk on/off indicator means that when risk off is indicated, Utilities should outperform equities, equities are more likely to drop. Furthermore, Market volatility should increase. Instead, what we got was a decent rally in stocks, even stronger in Utilities and plunging volatility. The indicator continues to be in an even stronger risk off mode this week.
Another bit of weirdness as US Equities hover around or hit new highs is that the retail sector drags on. Considering that the US economy is 70% driven by consumers and equities are on or near new highs the retail sector is up only +1.2% YTD and down -4.3% over the past 6 months. It’s the second worst performing sector after homebuilders. Go figure.