October 30, 2016
Weekly Market Outlook
By Keith Schneider
Artist: JR Lancaster
From: Schneider Art Collection
Market Outlook October 30, 2016
By Keith Schneider
The unique and rare compression pattern in US equites was nearly broken Friday when news surfaced that Hillary Clinton is back under FBI investigation. The resurfacing of the private server and deleted e-mails controversy that had plagued her presidential campaign was a result of the ongoing Anthony Weiner sexting investigation.
Equities promptly dropped -1% on the news, giving up the gains after the release of an excellent GDP number, showing an +2.9% annual growth rate which is the strongest in almost two years.
This left US Equites markets with mixed results for the week with IWM (Russell 2000) down over 2%, but the big caps in the Dow Industrials basically unchanged and the S&P 500 down -.5%. The market was caught off guard Friday as it was factoring in a Clinton win but managed to bounce and hold critical support.
The mixed modest weekly results for Equities hid seismic shifts occurring in gold, bonds, and commodities.
First, the risk off crowd gained fodder this week as utilities were the leading sector, generating a buy signal versus stocks, signaling caution and a flight to safety.
Second, adding to the risk off case is similar action regarding the Gold/ Spy ratio which abruptly erected a buy signal Friday after the Weiner/Clinton connection came to life. The bull move in gold which has paused over the past few months came back to life and closed above key moving averages.
Third, Commodities like copper which has been in a coma this year and which peaked in 2011 popped nicely, moving up over 5% for the week and busting thru important weekly and daily levels.
Even Agricultural commodities bucked the down move in stocks and moved into a confirmed recovery phase.
Fourth, moving to the fixed income asset class there was a steady decline in bond prices and a pop in rates. We have been highlighting the topping action in Bonds as our longer momentum indicators have been breaking down indicating the great bond bubble has popped.
On a more positive note regarding fixed income, high yield debt continues to hold ground versus US bonds, however, we have now closed under a key weekly level in the long bond.
A positive for US equities continues to be high levels of cash, equal to or higher than levels seen in 2008.
So there you have it, the good, the bad and the ugly. All in all this points to weaker short term picture for equities but lots of cash looking for a home. Other asset classes might be more interesting.