Market Recap for Monday, September 9, 2019
Monday's action was odd, mixed and bifurcated. The small cap Russell 2000 ($RUT) had a very strong day, rising 1.27%, while the NASDAQ, another aggressive index, fell 0.19%. The Dow Jones finished with a slight gain, but the S&P 500 lost a fraction of a point. Energy (XLE, +2.00%) and financials (XLF, +1.53%), two sectors that have lagged quite a bit in 2019, led the action on Monday, while 2019 leaders, real estate (XLRE, -0.75%) and technology (XLK, -0.75%), were two of the primary laggards. Healthcare (XLV, -0.92%) was the worst performing sector as medical equipment stocks ($DJUSAM, -2.31%) struggled after recently making a breakout above its late-July high:
Nearly every leading industry group in 2019 took it on the chin yesterday, despite our major indices ending mostly in positive or flat territory. Renewable energy ($DWCREE, -1.07%), easily the best performing industry group in 2019, fell despite a strong energy group. The DWCREE is consolidating in a bullish symmetrical triangle and is illustrated in the Sector/Industry Watch section below.
Software ($DJUSSW, -1.23%), financial administration ($DJUSFA, -2.63%), personal products ($DJUSCM, -1.89%), restaurants & bars ($DJUSRU, -1.02%), specialty finance ($DJUSSP, -1.92%), business support services ($DJUSIV, -2.49%), and defense ($DJUSDN, -1.99%) all took big hits on what appeared to be a ho-hum kinda day on the surface. It seemed like traders were content to sell recent winners and rotate into areas that have really been underperformers, looking for a bounce in those areas. That strategy certainly paid off on Monday.
Crude oil ($WTIC) is up another 1% in early action this morning, adding to Monday's 2.35% advance. The 10 year treasury yield ($TNX) is up another 3 basis points to 1.65%, which should aid equities in general, but especially financials (XLF). Gold ($GOLD) is down $12 per ounce to $1499. A close below $1500 would be GOLD's first in a month.
Stocks were mixed overnight in Asia and they're trading in similar fashion this morning in Europe. U.S. equities are showing weakness in pre-market action with Dow Jones futures currently lower by 35 points as we approach the opening bell.
One really big positive for U.S. equities has been the performance of transports ($TRAN) since the reversing bullish engulfing candlestick formed two weeks ago:
Since testing that early-June low, the TRAN has bounced roughly 8% and has its eyes set on the downtrend line that spans the past year. A definitive break above 10800 would be extremely bullish for U.S. equities, in my view, especially if accompanied by a continuing rise in the 10 year treasury yield ($TNX).
Renewable energy ($DWCREE) has been incredibly strong in 2019, but yesterday's action further squeezed the group in its current symmetrical triangle:
The uptrend is rather obvious, so I look for continuation patterns when we go through a period of selling and/or consolidation. If triangle support fails to hold in the 123-124 area, then I'd look next to recent price support just beneath 120 and perhaps the development of a bullish wedge or rectangular consolidation.
The following is a breakdown of the NASDAQ's annualized returns (since 1971) during the month of September:
Sept 1-19: +11.49%
Sept 20-26: -48.84%
Sept 27-30: -14.15%
It's very similar to what I posted yesterday on the S&P 500. That Sept 20-26 period is the one we really need to be aware of. It doesn't go down every year, but there's clearly a tendency for the period to be weak.
Key Earnings Reports
(actual vs. estimate):
HDS: 1.08 vs 1.08
(reports after close, estimate provided):
Key Economic Reports