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Morning Commentary

STEALTHY BUYING DIPS

By Charles Payne, CEO & Principal Analyst
10/16/2020 9:32 AM

Sometimes the most impressive stock market sessions aren’t the ones when all the market indices are through the roof. Instead, they are the ones when all the major indices climb off the canvas, just at the time when they could have been counted out.

Although the three major broad market indices failed to close in the plus column, market breadth turned higher. 

Six of the eleven S&P sectors were higher, led by the following sectors:

S&P 500 Index

 

-0.15%

Communication Services XLC

 

-0.77%

Consumer Discretionary XLY

+0.37%

 

Consumer Staples XLP

+0.06%

 

Energy XLE

+1.21%

 

Financials XLF

+0.77%

 

Health Care XLV

 

-0.72%

Industrials XLI

+0.37%

 

Materials XLB

 

-0.29%

Real Estate XLRE

+0.47%

 

Technology XLK

 

-0.45%

Utilities XLU

 

-0.06%

Texas Tea

U.S. oil inventories, as measured by the Energy Information Agency (EIA), declined by 4.398 million in the week ending on October 9, echoing the 5.42 million drops measured by the American Petroleum Institute (API). Astoundingly, distillate inventories saw its largest one-week drop since 2003. Crude oil inventories have been declining for several months as drilling slowed down.

The oil industry was operating 877 oil rigs in January 2019. But that number has tumbled to 193, which is higher than this summer when they hit the fewest since 1940, and drilling activity tumbled to its lowest level in 122 years.

We are watching the sector closely, as some of these names look attractive. However, using our investing methodology, we aren’t sipping the Kool-Aid or the tea just yet. Still, I must admit that it’s looking attractive.

The index has an intriguing chart that could be in the midst of a cup-and-handle formation and a possible breakout. 

XLE

Lots of Free Stuff = Much Higher Taxes

The Urban-Brookings Tax Policy Center (Brookings Institute) just updated its review of the Biden tax plan; it now says it would bring in $2.4 trillion, which is a massive decline from the $4.0 trillion they modeled back in March.

As the campaign has gone on, so have the promises, and this means the country would have to borrow a lot more money, or taxes would have to be higher for businesses and "rich" people. Make no mistake. Business taxes are going higher. And so will yours.

New Provisions

The largest Biden tax proposals that are reflected below in this analysis were not included in our March report:  

◼Temporarily expand and make fully refundable the child tax credit.

◼Provide credits for new investments in domestic manufacturing.

◼Provide a refundable first-time home buyer’s credit.

◼Expand and make refundable the child and dependent care tax credit.

◼Provide a refundable low-income renter’s credit.

Intrigue Watch

I am watching the restaurant stocks, which act great, along with brick-and-mortar retailers and financials that climbed higher without big bank stocks leading the way.

Hotline Model Portfolio Approach

We continue to be fully vested in the Hotline Model Portfolio.

Today’s Session

September Retail Sales blow away Wall Street consensus coming in  at 1.9% vs +0.7% consensus.

Retail Sales

Highlights

Department stores had a huge rebound, and clothing picked up, as more people went back to work and maybe gained a couple of pounds and needed to pick up new gear.

Restaurants picked up nicely, but one has to wonder how badly local restrictions will impact the industry this winter.

September 2020

M/M

Y/Y

Headline

+1.9%

+5.4%

Ex-Motor

+1.5%

+4.0%

Motor

+3.6%

+10.9%

Furniture

+0.5%

+4.6%

Electronics

-1.6%

-6.4%

Building Materials

+0.6%

+19.1%

Grocery

+0.1%

+9.6%

Health and Personal Care

+1.7%

+5.3%

Gasoline

+1.5%

-13.3%

Clothing

+11.0%

-12.5%

Sporting Goods

+5.7%

+14.4%

Department Stores

+9.7%

-7.3%

Internet

+0.5%

+23.8%

Restaurants

+2.1%

-14.4%

 


Comments
You know things are much better under Trump. And when you sound weak you give the Democrats strength. Hang in there and donít do that anymore. We are all upset about that. Thanks.

Jerry Del Re on 10/16/2020 3:14:19 PM
 

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