The Week That Was

Market Overview:

For the week, the small-cap S&P 600 grabbed the lead with a 2.3% gain,  The Dow and the S&P 500 lost 1% each, and the Nasdaq eased 0.4%.

Looking at our ETF Market Overview (I have put a box around the weekly performance for you convenience. If you look closely at the chart below you will notice all except Bonds and Gold advanced on Friday. Looking however, at the week and Friday is reversed with Bonds and Gold higher all the others lower.

Overview

The volume on Friday was lower across the board, not what you would like to see at this stage.

A quick look at the volatility this week; Overlaying the S&P 500, QQQ, and IBB for the biotech sector, that I mentioned earlier as having acted well. Notice how the strong bounce first and the most.

Screen Shot 2014-10-17 at 8.08.33 PM

 Market Sectors:

Top performers for the week:

Click pictures for a full sized look.

Screen Shot 2014-10-17 at 7.43.04 PM

The really big down day last week was supposedly caused by comments from a semiconductor company’s CEO.  A day or two later, the Gorilla in the room Intel (INTC) released a really good earnings report. Net, net on the week the SMH and SOXX in the top ten performers. Along with Biotech, Metals (really attempting to put in a base),  and Home Builders and Construction. Now compare the daily activity to this weekly data then to the monthly data. What do you see?

Bottom of the pack for last week:

Screen Shot 2014-10-17 at 7.43.55 PM

Noticeable  weakness in the healthcare sector, food and beverage, and retail. If the bull is to return anytime soon you are witnessing sector rotation happening now.

Instead of worrying whether a new bear market has sprung or if this is merely that correction that has been so elusive, just keep building and culling your watch lists be they ETFs, stocks, or funds. Watch the changes in leadership on both a daily and weekly basis, make notes. When the setup is right for you take the plunge.

Below is a chart of the 10 year Treasury note yields. Interestingly the break in the stock markets happened to coincide with the break down in yields. This could be the most important chart to watch for now. This picture was taken from MarketWatch and you can follow it their.

Screen Shot 2014-10-19 at 9.18.31 AM

Looking forward, the above chart along with the charts of collapsing commodity prices, especially Crude Oil recently, should have the powers that be worried about deflation instead of the all talked about inflation. While I have no personal experience with the markets in a deflationary environment, I would have to think dividends would be king. Keep up to date with our Option Writing for Income Spreadsheet! I will be trying to update the spreadsheet this week that will make it easy for any of you to use on your own.

I know that the links provided at the bottom of every trading notes are not the most popular feature. On occasion however, one appears like this: Lessons From Dorsey Wright’s Thomas Dorsey (Wealth of Common Sense) read it learn from it. Incorporate what you wish into your routine.

Todays Reports and Earnings:



Talking Points and One more reason to get a good night’s sleep:

Markets: Into uncharted waters (F T)
Shiller: When a Stock Market Theory Is Contagious (NYT)
Diagnosing the Market’s Mood Swings (Morningstar)
What Markets Will (Paul Krugman)
How will Saudi Arabia respond to lower oil prices? (Econobrowser)
Did Bill Gross Tip The Pop Machine Over? (A Wealth of Common Sense)
Stock Valuations Remain Near Record High Including in Europe and EM (GaveKal)
What Makes a Great Investor? 10 Great Investors Weigh In. (producthunt)
A Rate Cap for All Consumer Loans (NY Times)
Why I Love the Stock Market (A Wealth of Common Sense)
Privately, Saudis tell oil market- get used to lower prices (Reuters)
Good for Business: Five Years in, What Does ‘Shark Tank’ Mean for America? (Grantland)
Walter Isaacson: Where Innovation Comes From  (WSJ)
The Little-Known Story of How The Shawshank Redemption Became One of the Most Beloved Films of All Time (Vanity Fair)

Jeff Iliff: One more reason to get a good night’s sleep

Have a Great Day!