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The stock market entered October with negative and scary metrics, especially with the 'Hindenburg Omen' hovering over equities. We always pay attention to the HO, other market internals, and inner-market relationships during October.

Even though the average October is decent for stock market returns, history has shown that when it gets ugly, it can get bad quickly - like in 1929, 1987, and 2008. It was good to get through this October -- despite some negative internals -- with positive stock market returns in most areas and sectors of the market.

Even better news is that typically after a good October, the returns for the remainder of the year tend to be positive as well. However, we are watching some negative divergences closely and will remain vigilant in our risk management process.

The scarier part of October may not have been the Halloween celebrations around the country, but the cost of goods and services going up beyond expectations. While the government says we are seeing inflation at a 4-5% annual rate, there are a host of sectors, including building supplies, food, gasoline, and many others, that are going up year-over-year at double digit rates. It is expected that this year’s Thanksgiving will be the most expensive in history with turkey costs up 16%.

In fact, these past few weeks were met with more companies reporting that they are raising prices, including staples like Coca-Cola (KO), Proctor Gamble (PG), and others that will make everyday purchases more expensive and provide an additional “tax” and burden to average families in the U.S.

Yet the beat goes on. The Dow Industrials, the S&P 500, and the Nasdaq 100 all put in a strong week, hitting new all-time highs despite some misses from mega-caps like Amazon (AMZN) and Apple (AAPL). Meanwhile, Tesla (TSLA) roared closing above 1100, squeezing short sellers. We are considering going partially electric (hybrid) as well.

This Week’s Markets Highlights -  Risk On

• Three out of the four indices had new closing all-time highs on Friday, however, IWM has lagged and still has not taken out the highs that were made in mid-March.
• Semiconductors (SMH) and technology (XLK) were leading sectors on the week, each up about 2%.
• Consumer discretionary spending (XLY) was extremely strong, while the retail (XRT) sector was down on the week.
• In the global economy, clean energy (PBW) and solar energy (TAN) led all sectors, while soft commodities also put in a robust performance for the week.
• Growth stocks continued to outperform value stocks.
• Transportation (IYT) stocks are strong, but they are starting to run a bit rich and may be subject to mean-reversion to the downside.
• Gold backed off on the week and underperformed equities by a wide margin.

Risk Off

• Surprisingly, more than half of the major market sectors closed negatively on the week.
• Up/Down volume, the McClellan Oscillator, and Advances/Declines all weakened for SPY despite its strong price performance on the week.

 Neutral Metrics or Just Noteworthy Developments

• Risk Gauges have remained neutral despite new highs in SPY and QQQ.
• Volume analysis remains neutral for the major indices, with slightly more accumulation than distribution days.
• Sentiment readings did not improve for the SPY despite new all-time highs, with the number of stocks above the 10-day moving average remaining flat on the week.
• Long bonds (TLT) improved on the week and has recently been above its 50-day moving average as the yield curve continues to flatten on the long end of the yield curve.
• The US dollar (UUP) roared on Friday, up 0.8% and regaining a bullish phase.
• Emerging markets (EEM) was down on the week and closed below its 50-day moving average, while mid- to large-cap foreign markets (EFA) closed down but remained above its 50-day moving average in a bullish phase.

This Week’s Crypto Market Highlights

• Bitcoin (BITCOMP) broke down from new all-time highs and tested support at $60,000, recently looking at $63,150 as the next level to reach for a potential recovery back to price discovery.
• Ethereum (ETH-X) hit a new $4,460 all-time high this week and still looks to be holding up at higher levels.
• The biggest trend of the past week has been dog-inspired altcoins such as Shiba Inu (SHIB-X) and Dogecoin (DOGE-X), as traders seem to be diversifying out of large-cap cryptocurrencies at the moment.
• Facebook (FB) has announced an official rebrand to 'Meta.' This serves as a strong statement toward their goal to create their own metaverse, or a digital world with its own digital economy.
• Upon Facebook's announcement of their name change, other metaverse-based cryptocurrencies saw massive growth too, with Decentraland (MANA-X) increasing 257% on the week. Clearly the interest in the future potential of digital worlds and economies is garnering significantly more attention.