Major averages reversed Friday on mixed volume after trading higher for much of the day. The market gapped higher on Friday after Fed Chair Janet Yellen's speech Thursday night indicating that rates would most likely rise by the end of this year. This was interpreted as a vote of confidence in the US economy despite troubles abroad. Further, Q2 GDP growth came in higher than expected at 3.9%, adding further evidence of an economy on the mend.
Nevertheless, markets sold off due in part to concerns that House Speaker John Boehner is leaving Congress at the end of October which could lead to a government shutdown. That said, government shutdowns have occurred numerous times since the 1970s. Each time, markets have reacted with only mild negativity with both the S&P 500 and NASDAQ Composite down on average less than a percent.
Futures are down almost half a percent at the time of this writing on continued concerns about growth issues in China. The country’s industrial profits in August fell 8.8% from a year ago. The world’s second largest economy seems to be slowing faster than expected.
However one might wish to spin the news to fit the market's action, the bottom line is that stocks have been in a choppy sideways consolidation since the "Capitulation Monday" lows of late August, and many leaders that bounced in that process have started to roll over again. This, of course, brings into play the possibility of a new down leg developing at some point in the very near future, one reason why both the Market Direction Model and Volatility Model shifted to a sell signal last week.
This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2018 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.