Tuesday’s session was not a good one for stock market bulls as the NASDAQ 100 fell 1.39%. Small cap stocks led the market lower falling 1.5%. Volume jumped on both the NYSE and NASDAQ exchanges indicating institutions were dumping shares of stock. Not a good session, but not a surprise as the last week in September happens to be the worse week for stocks historically. The distribution day count is up there and after yesterday’s action caution is certainly warranted here as we continue to proceed through this week. It is important to maintain discipline here and obey all our exit signals. It would not be a surprise to see selling accelerate heading into the month of October. Impeachment talk simply adds to the list of items this market will worry about. Our focus will remain on what matters most: Price.
US and Chinese trade talks are still set to happen, but at this point the market will want to see a deal done. Whether it will produce gains for the market is anyone’s best guess. It will likely help the economy has the tariffs should come down. In addition, with impeachment proceedings beginning a lot of political dirt will be dug up and we will have to wait and see how stocks digest the news. There is a lot going on for the market to digest. It must be a giant pain to formulate a plan of attack if you pay attention to this noise. How can one remotely have an idea? Price is the ultimate indicator and it pays to watch what really matters.
XLU led the charge higher yesterday as investors are moving into safety. Bonds rallied again sending yields lower, but we still see the lower end of the curve higher than the 10-year. The 2-year treasury yield is not above the 10-year, but smaller maturities yield more. Bonds are still indicating weakness in the economy and given utilities are leading suggests stocks overall may have tough sledding ahead. XLRE is another sector to pay close attention to. Will investors seek refuge there as well? Utilities and Bonds are signaling continued weakness.
NFLX is continuing to slide further into oblivion. At this point it is challenging the lows of last year. This former leader has certainly lost its shine. NVDA for the most part has stabilized, but it too lost its shine after leading the market higher. We point these two out as a reminder to always obey your exit signals. Hope is a dangerous emotion in the stock market.
The rough waters look like they will continue. Stay disciplined.
