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Morning Commentary

KEY TEST OF SUPPORT AHEAD †

By Charles Payne, CEO & Principal Analyst
9/27/2023 9:39 AM

Yesterday was another gruesome session that saw 90% of the names in the S&P 500 Index finish the session lower. The index is now hovering above critical support (4,194), the current 200-day moving average. The Relative Strength (RS) (see arrows) and the Moving Average Convergence/Divergence (MACD) (see circle) flash oversold signals.

Finding support is one thing; the other challenge is regaining upward momentum.

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Seeing Red

All eleven sectors were in the red, and interestingly, the sector that’s supposed to provide cover when the market is getting slammed was the hardest hit.

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Amazon (AMZN) was under pressure from telegraphed anti-trust action by the Federal Trade Commission (FTC). I do not think Lina Khan, Chairwoman of the FTC, will break her losing streak in this case, as the problem will linger for years.

S&P 500 Map

Despite the current weakness, this year has been orderly, especially on down days.  There has only been one down session greater than 2.0% versus 15 in 2022. 

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But the 12.0% spike in the CBOE Volatility (VIX) is noteworthy.

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Fear & Greed

The spike in the VIX is just one of five indicators moving the Fear & Greed Index close to ‘extreme fear.’ The others include safe haven demand, stock price strength, stock price breadth, and put-to-call ratio.

The junk bonds demand is flashing ‘extreme greed.’

Leadership Void

Don’t look now, but the S&P Technology Sector (XLK) is in correction territory and at a critical support point.

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The problem for the stock market is that no other sector(s) has stepped up and provided leadership.

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Portfolio Approach

There are no changes to the sector weights this morning in the Hotline Model Portfolio.

Today’s Session

The market has been hovering above the flat line all morning, although not in any significant way.  The biggest economic release is Durable Goods.

The Headline came in +0.2 against the -0.5% consensus, but it has to be noted that the prior month (July) was revised much lower.

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The big development was the spike in business orders. For all the misleading talk about how strong household balance sheets are - some are strong, most are not - corporations are sitting pretty, and those with bonds that don’t mature in a couple of years can and should be putting money to work.

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