Not much to complain about for bulls this week – after surging early in the week and getting extremely overbought short term, markets have spent the past 2 sessions digesting that move by going sideways. Today the S&P 500 gained 0.27% and NASDAQ 0.17% as a last minute spike helped both indexes. Focus next week will be intense on the Fed as this is the meeting many expect some form of “tapering” of quantitative easing to begin. Whatever the case expect wicked volatility next Wednesday. As for today, there were 2 economic reports on the day – both missed expectations – but investors are too busy focusing on the Fed’s meeting next week to care much.
U.S. retail sales climbed by just 0.2% in August, missing expectations for a 0.5% gain. Excluding autos and gas, sales rose by 0.1%; economists were looking for 0.3% growth. The University of Michigan’s preliminary consumer confidence index fell unexpectedly dropped to 76.8 in September from 82.1 in August. Economists were looking for a print of 82.0.
Here is a look at the longer term charts of the S&P 500 and NASDAQ; there have now been 2 moderate corrections in the last 4 months after very slight corrections in the first 4.5 months. The NASDAQ continues to look stronger than the S&P 500 – the latter index has broken back over a previous high of mid August which is a positive but has some congestion ahead to get through.
This pullback the past few days has helped push the NYSE McClellan Oscillator down from a near 60 reading to the mid 30s. Consistent readings of 10-45ish are fine for a broadening rally.
Looking at what sectors aside from the red hot biotechs are leading it is energy and industrials for now. The former might be due to Syria – too soon to tell, but the latter is already at year highs.
Behind them we have some decent strength in technology and healthcare. Other sectors are a bit farther behind.