The S&P 500 (NYSEARCA: SPY) and broader stock market indexes were pounded last week by mixed earnings and news of mail bombs.
Global investors also are on edge about the upcoming mid-term elections here in the States.
Look for a choppy week ahead. Here’s some things to chew on:
– Â The stock market fell last week, with the S&P 500 (SPX) down 108 points to 2659, a decline of 3.9%.
– Â Markets were rattled by mixed earnings reports and a series of pipe bombs mailed to political leaders.
– Â Our projection this week is for the SPX to chop around with wide swings between 2725 and 2625, but with little change by the end of the week.
S&P 500 Market Cycle Outlook for the Week of October 29, 2018:
The stock market had another rocky week as investors were shaken by dramatic moments of panic selling. But for many traders, these were some of the best markets in recent memory, as I pointed out in the latest Market Week show.
With the SPX down almost 4%, the Nasdaq (NDX) and Russell 2000 (RUT) were about the same, while the Dow Jones Industrial Average (DJI) was down about 3%.
This was due in large part to earnings reports that were pretty good, but which fell short of the high expectations built into this bull market. For example, Caterpillar (CAT) beat estimates for earnings and revenue but did not raise its 2018 earnings guidance. Both Amazon (AMZN) and Google (GOOG) smashed earnings expectations, but missed on revenue.
Caterpillar and Amazon fell by 7%, while Google fell by 2% having recovered from earlier lows.
While these are only the results for one quarter and earnings season is far from over, we do have to ask where the future stock market leadership will come from. While 77% of firms in the S&P 500 have exceeded earnings expectations only 15 have raised guidance and 26 have lowered.
Last week was further complicated by a series of pipe bombs mailed to 14 people who had previously criticized President Trump, including Barack Obama and Hillary Clinton. However, no one was hurt, and remarkably, federal officials had arrested a suspect by the end of the week.
Another piece of good news was the gross domestic product figure, which came in at 3.5%, which was lower than the previous quarter but exceeded the consensus estimate of 3.3%.
As we head into the end of this year, the question is whether this price action represents a correction in the cyclical sense or whether this is something larger. Our view is that the bloom is off the rose and that volatility is here to stay. We see this as the start of a period that will involve wider swings in price action and higher tensions.
S&P 500 (SPX) Daily Chart
With regard to the current market, we think that volatility will continue. Using our approach to cycle analysis, we see a choppy week as two out-of-phase cycles alternate for dominance.
Given this, we are looking for a bounce up to the 2703-2725 resistance zone, with possible downside action to last week’s low of 2625. However, we see the end result as little change on the week, with more choppy action and wide swings.
For more from Slim, or to learn about cycle analysis, check out the askSlim Market Week show every Friday on our YouTube channel.
Twitter:Â Â @askslim
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
