Morning Minutes 10/11/2018

Morning Minutes

Stocks Remain Volatile as Earnings Season Approaches

October 11, 2018
9:00 am EDT

At SIA Wealth Management everything we do is based on Relative Strength Analysis. We evaluate the Relative Strength between asset classes giving us insight into money flows on a large scale, and from this select top ranked investments.

Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

Stock markets around the world have continued to sell off overnight and into this morn-ing. For several days, US indices had been losing ground and yesterday support really gave way, which led to declines of 2.1% for the resource weighted S&P/TSX, 3.2% for the more broadly-based S&P 500, and 4.0% for the tech-heavy NASDAQ. Overseas, the Hang Seng and the Nikkei are both down about 3.5% while the Dax and FTSE are down 1.6%-1.9%. Index futures have the S&P have clawed back early losses and are currently closer to flat, while treasury yields have eased back a bit after US consumer price inflation came in at 2.3% slightly below expectations.

Rising interest rates in the US, particularly treasury yields have been taking much of the blame for the selloff and while they may have been the catalyst, there are other factors at work that could keep markets volatile in the coming weeks. During the summer, US indices rallied to new highs while European and Asia Pacific markets fell 10%-20%. I always figured this gap would close sooner or later. It now looks like the US couldn’t keep floating above the storm forever and an overdue correction has started.

In the coming days, we could see big swings in both directions as forced selling from margin calls battles it out with bargain hunters. In addition to higher volatility in broad markets, individual groups and sectors could be active in the near term. Earnings season starts in the US tomorrow and the ability of US companies to meet high expectations has the potential to spark big moves in individual stocks.

Relative Strength and Sector Rotation Report:
Just as some sectors do better than others in a rising market, some sectors do worse than others in a falling market. Computer Software and Semiconductor producers were hit particularly hard on a relative basis as capital continued to move out of more volatile groups. The recent realignment of sectors may also still be impacting technology as investors increasingly recognize that some of the biggest and flashiest names left Technology last month and moved to Communications Services.

The tide going out can also help to identify the strongest swimmers. Yesterday, Energy stocks continued to move up the SIA Charts relative strength rankings.

SIA Wealth In The Media:
Colin Cieszynski appeared on BNN Bloomberg this morning speaking on this week’s market selloff and earnings season. A replay is available at www.bnnbloomberg.ca/video

Colin Cieszynski’s weekly US podcast is available with comments on interest rates, energy prices, stock markets and more https://omny.fm/shows/business-for-breakfast/oct-10-2018-hr-2 Colin’s part starts 29 minutes in to the hour.

Colin Cieszynski was quoted by Marketwatch.com yesterday on the impact of Hurricane Michael on energy prices.
Oil drops near 2-week lows as economist deems Hurricane Michael a ‘non-event for oil production’

Colin Cieszynski was quoted by Kitco News on what the stock market selloff could mean for gold.
3% Drop In U.S. Equity Market Could Spark Gold Rally – Analysts

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