[Outlook] Welcome to the Show!

Best Seasonal Sector Investments. Welcome to the Show! Best Seasonal Sector Investments. By Donn Goodman October 06, 2024 Welcome back and thanks for your loyal support of this weekly column. This past Tuesday, October 1, 2024, we welcomed the beginning of the 4th Quarter, typically the start of the best quarter for investing in the stock market. See the chart below for October-November and December average performance of the S&P 500: Welcome to the show reminds me of a popular song from the 1970’s (my era) group Emerson, Lake & Palmer. They were one of the biggest bands at that time. You may have heard the song “Welcome Back My Friends To The Show That Never Ends.” [You can click here to listen to it](. Welcome Back My Friends To The Show That Never Ends:(here are the lyrics from part of the song) Welcome back, my friends to the show that never ends. We're so glad you could attend! Come inside! Come inside! There behind a glass stands a real blade of grass be careful as you pass. Move along! Move along! Come inside, the show's about to start guaranteed to blow your head apart Rest assured you'll get your money's worth The greatest show it happens a hell-of-alot. You've got to see the show, it's a dynamo. You've got to see the show, it's rock and roll Right before your eyes, We'll pull laughter from the skies And he laughs until he cries, then he dies, then he dies This upcoming quarter will certainly be a dynamo. Important variables that could highly influence the upcoming quarter’s investment landscape. These include: a National Election with significant consequences as to which party rules the Executive Branch, Congress and the Senate. We have potential continued easing by the Federal Reserve (or not). We are mired in several geopolitical conflicts which could spiral out of control and pull the United States into a more active role. And, we have an upcoming earnings season starting soon that should provide more clarity on earnings growth, company’s projections for 2025 and if their expectations will continue to blow past estimates. Of course, we also have beautiful fall foliage, the Major League Baseball playoffs (note my Cleveland Guardians are in the thick of these), NCAA College and the NLF Football, the NBA starting, Halloween, Thanksgiving and of course Christmas and Hanukkah. It usually is the most festive and joyful time of the year! One variable that is also helping to fuel the worldwide stock markets and providing additional market liquidity is the global interest rate easing going on around the world. We addressed this specifically in last week’s Market Outlook when we described the recent stimulus provided by China. If you have not had a chance to read it yet or wish to review it, [you may go here](). Update on the week’s Market action: (some data provided courtesy of Gorilla Trades): The Dow and the S&P 500 pulled back after hitting new all-time highs the week before, with the Nasdaq and the Russell 2000 showing relative weakness amid a “risk-off” shift in investor sentiment. Treasury yields continued their post-rate-cut sell off. The 10-year Treasury bonds hit their highest levels in nearly a month, with the benchmark 10-year yield closing near 4%. This was predicated by Friday’s job market surprising report showing payrolls surging higher by 254K and the JOLTS job openings estimate jumping back above 8 million. The Dow and the S&P 500 went on Friday to record fresh record highs. See graphs below: Despite the Dow and the S&P 500's fresh record highs this past week as well as the NASDAQ hitting fresh new recovery highs, bulls were on the defensive as October kicked off with a surge in volatility in most asset classes. The quickly escalating Middle East crisis weighed heavily on investor sentiment as a broader conflict between Israel and Iran and its proxies looks more and more likely following this week's developments. Economic Indicators Non-farm payrolls, hourly earnings, the unemployment rate, the JOLTS job openings estimate, the ADP payrolls number, the Chicago PMI, and the Ward’s vehicle sales report all made bulls smile, with the critical ISM services PMI scoring a 19-month high of 54.9. On the other hand, the ISM manufacturing PMI slightly missed expectations, with construction spending and factory orders edging lower as well, as the manufacturing sector continues to lag the consumer economy. While the week's key economic releases were mixed, the job market sent bullish signals, and several forward-looking measures provided sizable positive surprises, so it is no surprise that rate-cut odds continued to slide despite the geopolitical tensions and the lingering global growth fears. It is looking possible that after the big rate cut of 50 basis points in September, the Fed may either take a smaller than had been expected rate cut this quarter, or now many analysts are even predicting that they don’t follow up their rate cut with any additional cuts for the remainder of 2024. Oil prices surged this past week. Earlier in the week, stocks turned lower across the globe as crude oil surged, with the dollar also gaining ground due to the increased safe-haven flows. Crude oil surged by double-digits after Iran launched a retaliatory missile attack on Israel, triggering a global selloff in risk assets, with only the energy sector and defense stocks enjoying tailwinds Here are a few charts on energy as the Oil markets broke above a descending trend line. See chart below: The Energy Sector (XLE) had its best week in nearly two years, rising +6.9%. It outperformed by a wide margin and broke out of a six-month downtrend. Crude Oil also had its best week in over a year, rising 9.1%. Heading into this past week, Energy (XLE) was the worst performing sector YTD 2024. However, it rose to 7th place (out of 11 sectors) after closing higher every day this past week. The recent move in the energy sector, especially crude oil has helped reignite the recent positive action in the commodities markets. Notice the recent bounce off support in the S&P Commodities Index (below). This is confirmed by the past 4-week move we have seen in the Bloomberg Commodities Index as well. See charts below: Where are we in the US stock market cycle? Click on the links below to continue reading about: - Panic vs. Euphoria - History of the 3rd year of bull markets - Q4 seasonality - Retail sentiment - The seasonality of sectors - The Big View bullets - Keith’s weekly market analysis video [Click here to continue to the FREE analysis]([Click here to continue to the PREMIUM analysis](=) Best wishes for your trading, Donn Goodman Every week we review the big picture of the market's technical condition as seen through the lens of our Big View data charts. The bullets provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral. The video analysis dives deeper. Risk On - After the initial drop from geopolitical stress, [markets rebounded]() and basically closed flat for the week after testing critical support, especially noted with IWM, which closed Thursday on the 50-Day Moving Average and then rejected it on Friday closing up 1.4%. (+) - [Volume patterns](), for the most part, remain positive across the key indexes. (+) - By the close of the week, KRE regained its bullish phase, putting [four out of six members]() of the modern family in bullish phases. (+) - Both [value and growth]( remain in strong bull phases with value closing at new highs on Friday. (+) - [Emerging markets]() closed at new highs for the year and outperforming the S&P over the last couple of weeks. (+) - The[color charts]() improved significantly across the board and look strong over shorter and longer term readings. (+) Click on the links below to continue reading about: - Panic vs. Euphoria - History of the 3rd year of bull markets - Q4 seasonality - Retail sentiment - The seasonality of sectors - The Big View bullets - Keith’s weekly market analysis video [Click here to continue to the FREE analysis and video.]([Click here to continue to the PREMIUM analysis and video](). Best wishes for your trading, Keith Schneider CEO MarketGauge P.S. 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