S&P Tumbles On Back-To-Back Days

January 29, 2020

Since peaking last Tuesday (1/21) at 3,338, the S&P 500 has tumbled with two ugly back-to-back days, leaving equity markets down 3% from all-time highs. While the sell-off was a mere two days, the velocity of the decline has pushed markets into oversold territory. With yesterday’s rebound it is very evident that there is lot of cash on the sidelines looking to be put to work on any weakness. The HCM BuyLine® is still very strong, and any pullback should be seen as a buying opportunity.

Coronavirus is going to cause a visible slowdown in China. This is causing concern and we will be watching closely in hopes it is contained in short order.    

Frame 2

 The Intermediate-term pullback looks very normal/healthy. Our outlook remains unchanged, and we expect equity markets to churn in a choppy trading range well into, and possibly through, Q2 before a suitably oversold condition can develop to support another multi-month up leg. The strength of the HCM BuyLine® continues to point to further upside for equities in 2020, with the current pullbacks viewed as a normal and healthy consolidation after an impressive surge in Q4. Tactically, cyclicals continue to consolidate above support following their Q4 rebounds, while lower volatility stocks that pulled back through Q4 are bottoming and reaccelerating at long-term uptrend support. 

SP 500

The Conference Board’s Consumer Confidence Index increased 3.4 points in January to 131.6, above the consensus of 128.0. While off its cycle peak, the index is still elevated and close to its highest level in nearly two decades. It continues to support a positive outlook for consumer spending growth and the broader economy in 2020.

Both the present situation and consumer expectations improved, due to a more favorable assessment of current and future job market and business conditions. Confidence was mixed by demographic group but rose across most income categories. Notably, the bottom income category posted its highest level of confidence since December 2000.

Consumers’ plans to purchase a home or major appliance improved this month at par or better than seasonal tendencies. Plans to buy a car, however, pulled back, in contrast to a slight usual uptick this time of year.

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