Market at a Glance - 10/27/2022

By: Christopher Mistal

October 27, 2022

Seasonal: Bullish. November is the 1st month of the “Best Six/Eight Months,” and the 1st month of the best three consecutive months November through January. Midterm November is also the 1st month of the best six consecutive month period and the Sweet Spot of the four-year cycle. #2 DJIA, S&P 500 and NASDAQ month of the year. NASDAQ’s best month in midterm years, averaging 3.5%.

Fundamental: Mixed? After declining in two consecutive quarters, GDP rebounded in Q3 to a better than expected 2.6% annualized pace. Unemployment data remains reasonably firm with an official unemployment rate of 3.5%, but labor participation is still below pre-pandemic levels. Inflation remains persistently high even as signs continue to point towards easing sometime in the future. Corporate earnings expectations are slipping, and the stubbornly strong dollar remains a drag on multi-national companies.

Technical: New Bull Market? DJIA, S&P 500 and NASDAQ all closed below their respective June lows in late September or in October. October has logged the most bear market bottoms or major turning points. Russell 2000 did not close below its June low. Major indexes have bounced off their recent lows and appear to be looking forward to the end of the Fed’s rate tightening cycle. DJIA has reclaimed it 50-day moving average. S&P 500 and NASDAQ have not. MACD indicators remain bullish. Further gains will be needed to truly confirm a new bull market.

Monetary: 3.00 – 3.25%. In less than a week, the Fed is widely expected to push its rate range higher by another 0.75% to 3.75% – 4.00%. They will also likely re-affirm their tough-on-inflation stance as official metrics have failed to make a meaningful move lower yet. However, based upon their forecasts last updated in September they are also likely to signal a slower pace of hikes going forward. Should this happen, the market is likely to respond favorably.

Sentiment: Neutral. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors stand at 36.9%. Correction advisors are at 24.6% while Bearish advisors numbered 38.5% as of their October 26 release. This reading marked the sixth straight week that bears outnumbered bulls. Over the last three weeks, the number of bulls has been climbing slowly as bears and correction advisors declined. Historically, periods when bears outnumbered bulls have been relatively low risk periods for accumulation.