Seesaw Market

There’s an earnings extravaganza going on this week. As of Friday, 18% of S&P 500 companies had reported their earnings. Of those companies, 78% of them are beating bottom-line expectations. Entering this week, everything is looking good. It’s hard to see if we can keep up that good pace but it would be great if we could. We’ve seen a seesaw in the market because we’ve had so many conflicting economic reports coming out, good and bad. If we have a good earning season, it will outweigh the bad news in the market. We saw retail sales miss last week but there was great news in housing. That’s what we call a seesaw effect. However, if earnings continue to increase, overall, that’s great news.

Leading Economic Indicators

There are two things that we are monitoring from last week. The first one is trucking. The trucking index is starting to turn up and, as you know, trucking is a leading economic indicator. The holidays are coming up which means the trucking number should continue to increase due to holiday shipments, which are usually done in advance to prepare for the holidays. Second is housing. The housing report came out last week and showed that new construction on single-family homes hit a high for 2019. That number includes people renovating their homes and taking advantage of good rates. The National Association of Homebuilders’ sentiment hit a 19-month high as well. As you can see, there’s a lot of positivity happening right now.

Support & Resistance

The market is at a critical point right now because it’s trading at 2986 on the S&P 500, which is right at the midpoint of resistance. Resistance is a price point where the market may have trouble going higher. From a technical analysis standpoint, sellers will come in and push the price back down. Earnings will be the fundamental story. The technical story has a lot more to do with price movement in points. There would be resistance at 3030. If we could cross above that 3030 mark it would be great. We would see all-time highs in the market and we believe it would only move higher from there. Good earnings could push us above resistance. There’s support at 2960. Right now, it’s at 2986 which is kind of a midway point with markets not moving higher or lower. When the news comes out this week, the earnings data could push us either much lower to the support area or through resistance and much higher. We are at a good pivotal point right now. We have emotions and the news that cause volatility in the market, but from a technical analysis standpoint, this is where buyers and sellers meet each other. The support area comes in when buyers rush in and say things are at a great value. Resistance is where the sellers think it’s overvalued and bring logic to the market. If there are more sellers than buyers, the market is going to go down and if there are more buyers than sellers, the market will go up. It’s a pure supply and demand mechanism.

 

 

Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here

Bobby Norman, CFP®, AIF®
Managing Director
Wealth Consultant
Email Bobby Norman here

Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth here

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