October 30, 2019

The HCM BuyLine® is positive, but with that said, markets have pulled up to the point that they are overbought. Look for the market to stall a bit here for a short period before it pushes higher in the coming weeks.

buyline10302019

S&P 500 3Q19 SALES & EARNINGS UPDATE:

  • 159 companies are reporting this week.
  • Of the 214 companies that have reported so far (43% of the S&P 500), 76% are beating earnings estimates by a median of 4%. 
  • On the top line, 57% are beating by an average of 2%.

spy10302019


Rates and currencies are moving in the right direction and are supportive of a shift towards cyclical stocks - US long rates continue to show evidence of bottoming, while a pullback is likely in the short-term. Conversely, the USD (DXY) has broken its 2018-2019 uptrend reinforcing the 1-2-year trend reversals developing in other risk-on markets. Expect a short-term bounce back this week but further weakness through Q4.

Fed action this week: The Federal Open Market Committee (FOMC) meets this week, and Wednesday will announce their rate decision that is expected to be the third 25bps cut this year.  However, watch the language of the statement accompanying the cut, and remarks by Chairman Powell at his press conference on Wednesday.  I anticipate the first moves to tamp down the expectation of more cuts when the FOMC meets again in December. 

When they made their last cut, two FOMC members opposed the cuts, and economic data has held up well since then.  The Federal Reserve does a pretty good job of telegraphing future rate moves. I expect that process to begin Wednesday with changes in the statement and hedging on the part of the Chairman to signal a pause in rate cuts.



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