The S&P 500
(INDEXSP:.INX) lost ±1 ½ % the week ending October 26. More significantly, market breadth turned decidedly negative this week. As of Friday, of the S&P 500 stocks, 143 have negative momentum, 317 have neutral breadth, and only 40 have positive momentum.
So far in the earnings season, health care, consumer staples, and financials have been the outperformers, while materials, industrial, and technology stocks have underperformed.
After an encouraging third-quarter GDP report on Friday, as well as slightly better-than-expected consumer sentiment figures, the key economic reports next week are:
Chicago PMI report.
ISM Manufacturing and Construction reports.
Given the results of earnings season so far, market expectations appear to be well balanced – being neither too optimistic nor too pessimistic. Investors are (rightly) rewarding companies that are beating consensus estimates for earnings and revenue forecasts. As such, we encourage investors to continue to place great emphasis on fundamental analysis, and continue to focus new capital on the sectors that demonstrate the greatest level of relative strength.
Key earnings reports this week:
Tuesday: Archer Daniels Midland
(NYSE:ADM) and Ford
(NYSE:CLX), Murphy Oil
(NYSE:MUR), General Motors
(NYSE:GM), Ralph Lauren
(NYSE:RL), Southern Company
(NYSE:SO), and Visa
Thursday: Exxon Mobil
Continue to raise cash and sell covered calls against larger positions. Buy December PUTS on any rally.
Follow Oliver Pursche on Twitter: @opursche.
No positions in stocks mentioned.