The Financials (XLF) went from the worst performing sector on Wednesday to the best performing sector yesterday. As a result, the XLF moved back to bullish TRADE and TREND. Yesterday, the S&P 500 closed at 1,093, up 1.1%. So much for the big "correction," CRASH CALLERS got run over again!
On the MACRO front, the markets support came from a key batch of economic data out of China that helped put the global RECOVERY trade on the front burner. Also, the trend of better-than-expected Q3 earnings continued yesterday, especially in Technology and Healthcare. A bounce in the dollar early in the day, weighed on The Energy sector.
Yesterday, initial jobless claims rose 11,000 to 531,000 for the week-ended October 17th. Although the four-week moving average continued to trend lower. Lastly on the MACRO front, leading indicators rose a better-than-expected 1% month to month in September, marking a sixth consecutive monthly increase.
The portfolio activity included buying the Taiwan Index fund (EWT) and shorting the Consumer Discretionary (XLY). We bought more SONC and shorted Nokia (NOK). From a Research perspective, Rebecca Runkle remains bearish on both NOK and RIMM; she likes AAPL and MOT. Nokia is up here on the day, so we'll take that as our entry point.
Yesterday, only three sectors outperformed the S&P 500 and every sector was up on the day. The three best performing sectors were Financials (XLF), Consumer Discretionary (XLY) and Materials (XLB), while Energy (XLE), Consumer Staples (XLP) and Utilities (XLU) were the bottom three.
The NAR is due to report at 10am existing homes sales. A Bloomberg survey suggests that sales improved in September to the highest level in two years. The survey suggests that sales rose 4.9% to a 5.35 million annual rate; the improvement would be the fifth in six months.
Today, the set up for the S&P 500 is: TRADE (1,071) and TREND is positive (1,009). The Research Edge quantitative models have 9 of 9 sectors in the S&P 500 positive on TREND and 9 of 9 sectors are positive from the TRADE duration. Yesterday, the Financials moved back to positive on both durations.
The Research Edge Quant models have 1.0% upside and 2.0% downside in the S&P 500. At the time of writing the major market futures were up.
The Research Edge MACRO team.