October 23, 2019

The HCM BuyLine® is showing a solid uptrend. As previously mentioned, we still expect a nice year-end rally, but we also anticipate some short-term chop that will be short-lived. Some sideways chop would not be surprising given that the S&P has rallied into a resistance band between 2875-3025. However, daily/short-term momentum indicators are still early in upturns, suggesting further upside over the coming 2-4 weeks.

spxxx

The US and China say that negotiators are making progress towards a formal agreement to implement the so-called “phase 1” deal that the President announced with Chinese Vice Premier Liu. We think there are some potential roadblocks, foremost the troubles in Hong Kong. The US House unanimously passed the Hong Kong Human Rights and Democracy Act. China also made it clear that any Congressional bill like this would be infringing on domestic politics. They told the Administration they could expect a veto of such a bill. President Trump has mostly stayed clear of the tensions in Hong Kong, and at this point, it is not certain if the Senate will take up the House bill. The markets will be watching all signals concerning the US/China trade.

Within equity markets, breadth is expanding with the Financials, Discretionary, Cyclical Technology, Industrials, and Select Materials, and oversold bounces underway in Energy driving the rotation away from safety stocks.

  • The Weekly Retail Chain Store Sales Index rose 3.1% last week, and was up 2.7% y/y, above trend-growth. 
  • Separately, Redbook noted an improvement in same-store chain-store sales last week versus the previous week, as colder weather and the Columbus Day holiday, drove up demand for seasonal merchandise. 
  • Month-to-date, sales were off 0.1%, below the target of +0.4% for the full month, but with enough time for sales to catch up to target as demand usually ramps up ahead of Halloween. 
  • Sales were up 4.2% y/y, also short of the target of 4.7% y/y.

 

Wealth Watch

Sign up for our weekly news to hear from CEO and portfolio manager, Vance Howard.