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Morning Commentary

TESTING ALL THE HIGHS

By Charles Payne, CEO & Principal Analyst
10/20/2021 9:38 AM

It was another good session yesterday, but it was borderline great, considering the strong surge of buying into the close. As a result, market breadth was more bullish, although volume continues to be sluggish.

Market Breadth

NYSE

NASDAQ

Advancing

1,873

2,803

Declining

1,405

1,650

52 Week High

130

96

52 Week Low

26

83

Up Volume

2.15B

2.98B

Down Volume

1.30B

1.44B

For the S&P 500, it was mostly a sea of green.

 

Hello, Old Friend

That late spark nudged the S&P 500 within 1% of its all-time high. The action over the past five sessions has been impressive.

There’s still an eclectic market, while the wild leadership pendulum continues to swing. It’s been a long time since I’ve seen the top ten winners dominated by medical device makers and Utilities (XLU).

But the top percentage gainer was Penn National Gaming (PENN), one of those names with a huge retail investor following. It’s prominent in the Russell 2000, which continues to be range-bound.

Late Spark

S&P

NASDAQ

Low

4,496

15,391

High

4,520

15,415

Close

4,519

15,409

Looking for More Action

Right now, I would like to see overall volume pick up on the S&P 500, and of course, the big test is hitting a double-top and not pulling back.

Why Can’t We Be Friends?

Yep, the ten-year bond yield is moseying up to the high hit on March 31st.  Back then, it not only roiled growth stocks, but tilted the thinking on the street as a lot of folks jumped on that value ship that had been lagging for a decade (many were already stuck and welcomed the company). But yesterday, growth held up nicely, and perhaps higher yields and growth stocks can coexist. Hint: they have in the past.

FAANG You Very Much

The FANG+ Index is already back to an all-time high even with recent sluggishness.  After the bell, Netflix (NFLX) beat on earnings with more subscribers than expected and the stock edged higher. 

Interestingly, management offered earnings for the current quarter well below Wall Street’s consensus.   But the stock was higher. However, the stock has given up those gains and has turned lower.

Maybe, just maybe, the year-end rally has begun.

Portfolio Approach

We took profits in Consumer Discretionary and Financials yesterday in our Hotline Model Portfolio.

Today’s Session

Earnings continue to pour in, and the issue of inflation and higher cost are hurting some industries more than others.

Brinker (EAT) is one of the biggest losers and dragging its rivals down as well.  Management listed the issues, but it also noted it would phase in higher prices.

- Increase of Inflationary costs

- Increased labor costs

- Increased training and overtime costs

China Bounce

I’m very worried about the aggressive aims of China’s communist government, but I think it’s too late for them to totally dismantle or takeover their big tech names.  They will shake them down for money and information, but folks like Jack Ma that really thought there was a new day have been shut down.

But investors are optimistic for a bounce now that Ma and family have been seen vacationing in Spain.

The China tech KWEB ETF has an amazingly bullish chart.   I understand some folks would never buy these stocks – for those that would, this is probably the time.

Interestingly China President Xi has a game plan that is more reasonable than the progressive game plan – he wants to avoid the welfare state, but he also claims he doesn’t want a winner takes all nation as well.

 


Comments
up on low volume would suggest a breakout

Patrick J Pedley on 10/20/2021 10:17:01 AM
 

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