Introduction

FBI Director Comey says no new evidence and the market cheers. The news came late Sunday afternoon, in time for global markets to rally, but doesn't seem to have moved the needle very much in terms of the polls. The only thing I can say to that is that the pollsters said England wouldn't Brexit up to and until the polls closed. Today's action was extreme to say the least, a knee jerk reaction to non-news news, and on such tepid volume all of today's gains could be reversed with ease. Aside from that, news was centered on the election in general, the debate of which candidate is really better for the economy and to some extend earnings and economic data expected out later this week.

International were very moved by Comey's ringing endorsement of Secretary Clinton and rallied just about across the board. Asian markets were up in the range of 0.5% to 1.5% give or take, European markets were more vigorous and rallied in the range of 1.5% to 2.5%.

Market Statistics

Futures indicated a substantial rally at open, nearly 1.5% for the S&P 500, all morning and nothing in the early hours of the day dampened the mood. There was little in the way of earnings, only 31 S&P 500 companies are expected to report this week, and no economic data to speak of. The indices gapped up at the open and then proceeded to climb throughout the morning, although as I said volume was no better than average. The rally continued all day, more likely due to a lack of sellers than a hoard of buyers, and left the indices at the top of the day's range with gains in the range of +2%.

Economic Calendar

The Economy

No economic data today and very little this week, about 10 reports including oil and natural gas inventories. What we do have is fairly inconsequential; JOLTs tomorrow, wholesale inventory on Wednesday, jobless claims Thursday and Michigan Sentiment Friday. Next week is a different story; CPI, PPI, housing data, manufacturing indexes, Fed surveys, the works.

Moody's Survey Of Business Sentiment made a whopping jump of 1.4% last week despite the email curve-ball thrown to us. The index is now reading 31.8%, the highest level since early May. Mr. Zandi says that global business sentiment is holding up well and is steadfast. The US leads, South America lags, but all in all the global economy is expanding at a pace on par with expectations.


A little more than 85% of the S&P 500 has reported earnings so far this cycle and the results are better than expected. The caveat is that forward outlook continues to decline, although it remains positive and showing earnings growth into the end of next year. Of those that have reported 71% have beaten EPS estimates, above average, while only 54% have beaten revenue estimates, a little below average. The blended rate of earnings growth for the quarter is now 2.7%, up more than 1% from last week. At this rate we could easily see the final rate of earnings growth come in above 3%.


Looking forward growth is expected to continue in the fourth quarter but those expectations have fallen by -0.7% in the last week to 3.9%. Full year 2016 estimates remain firm at 0.2% and will likely rise before the end of the 4th quarter cycle. Full year 2017 estimates have also fallen, another -0.4%, with all index growth projected to be 11.6%.


The Dollar Index

The Dollar Index jumped 0.75% in the biggest move since late June. Today's action, if in line with longer term dollar outlook, was driven entirely by the FBI revelation and market relief, however misplaced. Long term outlook remains dollar positive, the FOMC is on track to possibly raise rates in December while other central banks remain locked into QE programs. The Fed Watch Tool shows a 76.5% chance of hike at the December meeting First upside target is the $98.56 level, a break above that could go as high as $100.50.


The Oil Index

Oil rebound somewhat today on remarks from OPEC that it was really going to cut production levels at the next meeting. The news helped to lift prices by nearly 2% but failed to carry WTI above the $45 mark. The OPEC news is bullish but met with skepticism, what have they been able to do so far?, so it's impact on prices is likely limited in the face of high supply, high production and tepid demand. The $45 is one possible level for resistance, $46 and $48 look more likely targets for pullbacks should bullish sentiment persist into the end of the week.

The oil sector remains trapped within recent ranges with little hope of breaking out, to the upside, while oil prices remain below $45. The Oil Index itself remains range bound within the upper half of the 7+ month trading range and shows no signs of imminent exit, in either direction. The indicators remain firmly weak and consistent with range bound trading, trending near/around the mid-points of their respective ranges. Oil prices may continue to rebound, the index may follow, but resistance at the upper boundary near 1,180 is likely to hold.


The Gold Index

Gold prices tanked today on a rising dollar and risk on appetite. The price of spot gold fell -1.75%, nearly $23.00, to trade just above $1,280. Today's action confirms resistance at the $1,300 level and could take the metal down to longer term support levels near $1,250.

The Gold Miners ETF GDX fell -3.5% in today's action, falling from the short term moving average and below the 38.2% retracement level. This move reconfirms resistance at the moving average and the gap formed October 4th, if not a continuation of the short term down trend. The indicators are confirming resistance and indicating a buy in line with the prevailing short term down trend so a move lower to retest for support looks likely. The $23.50 level is a possibility but $22.50 looks like a firmer target to me. A drop below support would be bearish and could lead the ETF down to $19.75.


In The News, Story Stocks and Earnings

The VIX fell sharply in response to today's rally, shedding just over -17.25%. The so called fear index in retreat from a short term high but not necessarily heading back down to previous low levels. First target for possible support is near $17.50 with additional targets just below that near the short term moving average. Considering the earnings environment, a still spotty economic recovery, Fed uncertainty and tomorrow's election results it is very possibly we could be entering a period of increased, prolonged, volatility regardless of the ultimate direction of the equity market.


Sysco, the nations largest purveyor of restaurant supplies, reported earnings before the bell and delivered a positive surprise. The company reported adjusted earnings of $0.63 per share, better than expected and excluding the addition of a recent acquisition. On a not adjusted basis sales grew 11.2% over the comparable quarter with a 20% increase in gross profit and a 146 increase in margins. Shares of the stock rose nearly 10% to trade near the recently set all time high.


Priceline reported after the bell beating on the top and bottom line. The bad news is that total revenue fell roughly 50% from the year ago quarter and forward guidance is on the weak side. Despite the mixed news shares of the stock rallied in after hours trading, extending today's gains to nearly 10% and setting a new all time high.


The Indices

The indices moved up and up and up today, closing at the highs of the day. The move was led by the Dow Jones Transportation Average which gained more than 3% and broke out to a new 1 year high. Despite the break out the index remains below potential resistance and well below the all time high. Resistance is at 8,350, a resistance zone set at the end of last year, and may be strong. The indicators are bullish and pointing higher so a test of resistance at this new level is likely. A break beyond this could be quite bullish and lead the entire market higher.


The next biggest gainer in today's action was the NASDAQ Composite. The tech heavy index gained nearly 2.4% and created a small white candle after gapping up more than 1.5% at the open. Today's action is bullish and looks like a bounce in line with the long term up trend. The indicators are a bit spotty, bullish in the near term but not showing strength or even really confirming support at this level, so I am not fully convinced the bounce is for real. First target for resistance is at the 5,200 level and the short term moving average, a break above that more bullish but still in need of breaking resistance near 5,350. If the index falls back in tomorrow's session support is near the 5,000 level.


The next biggest move was made by the S&P 500. The broad market gained a little more than 2.25% in a move that regained the upper side of 2,120 but fell short of the short term moving average. The move looks like a bounce from a long term trend line but is yet to be confirmed by the indicators. The indicators remain mixed and on the weak side so I would not be at all surprised to see another test for support, possibly as low as 2,100 or just below.


The Dow Jones Industrial Average brings up the rear in today's session with a gain of only 1.87%. The blue chips created a long white candle that appears to be confirming support at and bouncing up from the long term up trend line. The caveat is that today's action is really just a volatile swing within the 2 month trading range, and one driven by an extreme swing of sentiment (Comey releases email news and market falls, Comey says emails are no big deal and market surges). If the index breaks out of the range to the upside we could see a test of the all time high.


The market made a nice swing today but I'm afraid that is all it might be, a swing. The move was driven by a wild shift in sentiment that could easily swing the other way tomorrow. Aside from the transports the indices remain trapped within recent ranges and waiting for the election results with little indication of which direction they will go once the results are in. I still see the signs of a long term rally in the making, there may be a correction post-election but in my view it will most likely be a buy-on-the-dip opportunity for long term positions.

Until then, remember the trend!

Thomas Hughes