Earnings from NFLX helped boost the NASDAQ higher, but sellers were able to wrestle control over the market just after mid-day. Volume spent most of the day higher across the board, but hardly anything to get excited over. The next big hurdles for this market come within a month’s time. We have the next Fed meeting as well as the presidential election. For all accounts, the Fed does not appear to be raising rates and Hillary Clinton is leading in every poll. To paraphrase Hillary Clinton “how is this market not 500bps higher?” While a few of you wrestle with the why we will focus on the price action in front of us. To date we still remain on very shaky ground. This does not mean a cataclysmic event will occur taking the Dow down 5000 points. What it does mean we are at risk of further downside and we must be prepared. Until we see definitive positive action our defensive stance will remain. There is no need to be a hero either way.
Health Care related names bounced back today leading the S&P 500 higher. The group has been pounded into the ground as Health Care has been a hot topic of discussion during this election season. Biotech related names weren’t the biggest contributors to the sector today. Health Care Equipment and Services group was up more than 2.34% today. Providers and Services pushed the group higher. XLV still remains below its 50 day and 200 day. It may be awhile before we see this group lead.
This market close was absolutely atrocious. Sellers continued to dominate the market pushing the entire market near session lows at the close. Last week the NAAIM exposure index showed many active managers heavily exposed to US Equities. However, a Bloomberg article today showed investors with the highest levels of cash not seen since 9/11. Clearly investors are spooked over the current state of the economy. We can only go on price action and not our opinion of the market.
We are two weeks from the next Fed meeting and 3 weeks from the election. Plenty of time for the market to continue this chop and slop. The prudent action would be to size your positions properly according to your risk tolerance. Otherwise, you run the risk of churning your portfolio. There is no need to be a hero.
Stay the course.
