It was the final week of trading to close out October, which is typically a scary month for investors. However, no blood was shed unless you got caught short in what turned out to be one of the best investment performance months in stock market history.
The biggest event of the week was the FOMC’s interest rate policy statement. (For anyone insistent upon delving deeper into the past week, please refer to VFTH archives for our daily summary of bullish and bearish economic data and other market moving events.) As expected, the Federal Reserve did not raise interest rates but quickly reminded market participants that it is prepared to do so as early as December-2015, provided forthcoming data warrants such change.
So how is the data these days? GDP was somewhat bearish @ 1.5% during Q3-2015 and disappointed as it failed to meet consensus estimates @ 1.7% and significantly under-performed the previous quarter’s 3.9% growth. Then again, the labor market is showing signs of tightening with Unemployment Claims at historically low levels and early signs of wage inflation starting to emerge. Outside of this and as far as the Fed is concerned, there are no real problems with inflation as Personal Income and Spending, a favorite Fed indicator, were slightly weaker than expected and crude oil prices remain low which provides some quantifiable relief for consumers.
Among asset classes, Stocks and the US Dollar Index experienced no significant weekly change in price. Volatility (VIX) and energy Commodities (WTI Crude Oil) were the week’s best performers while treasury rates for the 10-year note came in an inversely respectable second for Bonds. Other interest rate sensitive assets, e.g. Gold and Utilities, seemed to confirm the imminent fears of higher rates as both performed relatively poorly this week. The housing market data has been extremely volatile and, therefore, it should be no surprise that the Dow Jones Home Construction Index was the weakest link in our capital markets universe.
Overall, both bulls and bears stood down and ended the with a week without much incident to close out a very positive month for stocks.
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Market Condition
The SP-500 is beginning to run into some overhead resistance as it approaches the bottom of the bullish channel it violated back in August-2015. The level of 2100 (this week’s high of 2094.32 is close enough for government work) is an important psychological challenge for the bulls and the market is is currently overbought. While a high percentage of the benchmark index’s components are maintaining support at short and intermediate time-frame periods, a signal for caution is the bearish crossing of the 22-week average below the 55-week average. Keep Hillbent for the Market Direction…
Market Momentum
| > 20 M.A. | > 50 M.A. | > 100 M.A. | > 200 M.A. |
| 71% | 78% | 48% | 48% |
Technical Analysis
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