I have to say these sessions that are largely nice and steady are good for the investing soul. Like homemade chicken soup, they add a kind of calm that a massive rally day could not. Yesterday, the market was steady, but it hit an air pocket, then it rebounded and gained strength into the close. There was nothing manic or depressing, just slow and steady.

All S&P 500 sectors held up nicely, but the focus was on caution; hence, Utilities enjoyed the best session outside of Energy.

Energy stocks got a bump as the Gulf braces for another major storm. I suspect some value investors are also in the oil patch looking for trades, too.

Financials reacted positively to the Morgan Stanley (MS) takeover of Eaton Vance, an investment management firm, as there will be more consolidation in the sector. Morgan Stanley shares reversed higher after gapping down on the news. It appears Wall Street crunched the numbers and decided the Wall Street giant did not overpay as many feel they did with their E*TRADE acquisition. 

S&P 500 Index	+0.79%
Communication Services XLC	+1.28%
Consumer Discretionary XLY	+0.68%
Consumer Staples XLP	+0.73%
Energy XLE	+3.66%
Financials XLF	+1.39%
Health Care XLV	+0.50%
Industrials XLI	+0.98%
Materials XLB	+0.96%
Real Estate XLRE	+1.65%
Technology XLK	+0.48%
Utilities XLU	+1.76%

It’s Happening

Market breadth was strong again. 

NYSE

• 2,313 advancers
• 162 new highs
• 3.23 billion up volume

NASDAQ

• 2,333 advancers
• 165 new highs
• 2.13 billion up volume

I have been writing about this. Finally, it is happening - more companies are moving from the red column to the black column. The transition is triggering a renewed interest, serving as a buy signal for investors. Many of our legacy disasters are suddenly acting great – we will detail them in the weekly Portfolio Approach Review.

There is a lot to be said on a more balanced move in the market. Even with all the flaws of share price-weighted indices.

S&P 500

These are the most names in the winning column since the coronavirus crisis, and the average gain is beginning to stretch. But there are still more losers, and on average, they are down a ton.

Winners

• 241 average gain: +23.73%
• The top 20 average gain: +85.84%  

Losers

• 262 average loss: -22.74%
• The bottom 20 average decline: -60.08%

NASDAQ Composite

Now, there are solidly more winners than losers in this index, as buyers are moving well beyond those half dozen names that carried the entire market for months.

Winners

• 523 average gain: +72.04%
• The top 20 average gain: +587.69%   

Losers     

• 482 average loss: -25.08%
• The bottom 20 average decline: -65.90%

Watch the Semis

After the close:

• NXP Semiconductors (NXPI) raised its guidance for the quarter. Management now sees the third quarter 2020 (3Q20) revenue at $2.27 billion, accelerating from midpoint guidance of $2.20 billion, and well above Wall Street’s consensus of $2.01 billion.
• Non-GAAP operating income of $586.0 million, against its guidance of $444.0 million.
• Management credits material improvements across all ends of the markets, particularly automotive and mobile, as a result of a faster than anticipated pace of business, which will enable higher gross margin.

This news reflects well on semis and the economy.

Technical Lesson

The VanEck Vectors Semiconductor (SMH) index closed right at a double top. NXPI is the tenth-largest holding with more than 900,000 shares. 

There is no doubt we could see a classic breakout through this double top, which is almost always a negative formation, making breakouts even more attractive.

The opening above yesterday’s close will attract a lot of momentum buyers. But make no mistake, this move is being driven by improving underlying fundamentals, which is always worth chasing.  

There might be some backing and filling upon breaking out, but I think there is a minimum of 10% more in the exchange-traded fund (ETF), perhaps a lot more.

SMH

 

Portfolio Approach

We added a new position yesterday in Communication Services. This morning we are adding a new position in Consumer Discretionary in our Hotline Model Portfolio.

Today's Session

The market continues to focus on stimulus, but make no mistake, there are other things going on and driving the action, including more high profile takeovers.  This morning the big news is a potential deal that would see Advanced Micro (AMD) takeover Xilinx (XLNX) for $30.0 billion.

Folks this is just the beginning of a wave of takeovers across all sectors. 

 

 

Comments

Watch the Semis -- The VanEck Vectors Semiconductor (SMH) index closed right at a double top -- There is no doubt we could see a classic breakout through this double top, which is almost always a negative formation, making breakouts even more attractive. ......... then that triple top in semi eq is overdue? prettydirect on 10/9/2020 11:54:28 AM

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