Growth sectors are under severe pressure, especially Communication Services, which took an absolute beating yesterday. Consumer Discretionary was also slammed with Technology bringing up the rear. Real Estate is under the gun big time as well.

These sectors getting slammed have enjoyed monumental years. It's important to have pull backs, but try to manage your sense of panic.  Communication Services is still up more than 27.0% this year.  It's unnerving to see and feel rollercoaster-like drops, but it is par for the course with High Beta grand slams.  It’s fine.

Heat Map

I think a more significant concern is the lack of buyers for stocks in non-growth sectors that can’t catch a bid.

Oversold Signals

The market is rapidly approaching oversold conditions, as only 25% of the names in the S&P 500 are changing hands above their 200-day moving average.

Fear Moving Higher

The VIX continues to climb, but still not with the kind of velocity that permeated the NASDAQ selloff.  This year’s moves above 20 have marked trading buy signals, but the actual ‘oversold’ signal happens at 24.

I do not want to see it happen, but if it does, it is best if it occurs dramatically – like a big flush.

Market Breadth

The big spike in volume on the NASDAQ is a byproduct of significant selling in big Tech and Communication Services.

There were only 12 new highs on NYSE and 22 on the NASDAQ yesterday.

Market Breadth	NYSE	NASDAQ
Advancers	683	1,187
Decliners	2230	3,056
Market New Highs	12	22
New Lows	421	598
Up Volume	1.06 billion	1.09 billion
Down Volume	2.77 billion	3.45 billion

Whip It Real Good

The spike in  ten-year bond yield has not been seen since Paul Volker was tasked with ‘whipping inflation.”

I know most professional investors still think this is temporary, but maybe it's not.

Believe it or not.

The Atlanta Fed sees third-quarter GDP at 5.4%.  I find it hard to believe.

Shaking in Your Boots?

I know it’s a worrisome time, but you cannot panic. The frustration is real when you own shares of a company that just posted strong financial results and raised guidance only to see the share price decline with the broad market weakness.  Keep your wits about you.

I want to be an aggressive buyer above 4,600.  Everything resets, and the irony is, great stocks are getting cheaper, but it's soon time to be an aggressive buyer.  

We are working feverishly to go through all the names and numbers.  Be ready.

 

Portfolio Approach

There is no change to the sector weights in the Hotline Model Portfolio.

Today’s Session

Third quarter GDP at 4.9% comes in higher than most estimates, but there are intriguing factors that mitigate the impact of the “surprise.”

Initially, bond yields popped, and stocks stumbled, then found their footing.

It still looks like a weaker start to the session, but there are more signs the selling is overdone, at least on a short-term basis.

                       Core PCE 2.4% from 3.7% and 5.0%

We get the September PCE report tomorrow.

Meanwhile, business orders in the Durable Goods report was higher than consensus.

Initial & Continuing Jobless Claims

Initial jobless claims climbed to 210,000. This is slightly higher than the consensus of 207,000. But look at that spike in continuing claims.  This is huge.

When I see Meta indicating (META) lower, I know this is all about the bias of the market. Whoever is selling (man or machine), it is a huge mistake.

Let’s see how the morning session trades.

Comments

What about those critical levels of support? Should we move the goal posts again? Like I commented several weeks ago....next stop, Death Cross. Time will tell, of course, but it looks closer and closer from where I sit. Charles A Haselberger on 10/26/2023 11:55:33 AM

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