Communication Services – Strong Thursday Rally

The stock market rallied strongly again Thursday as the S&P 500 increased 0.78%, the Nasdaq increased 0.98%, and the Russell 2000 was up 0.43%.

As you can see from the chart below, the Dow was the last of the 4 major indexes to reach a new record after the January peak. It was up 0.95%. Under Armour was the biggest winner in the S&P 500 as it increased by 6.6%.

The biggest news out of the company is it will be laying off 400 workers. Wells Fargo announced it will be laying off 5% to 10% of its workers in the next 3 years.

That amounts to 13,250 to 26,500 workers. The firm is still reeling from its scandals and wants to adopt digital self-service capabilities. Red Hat was the biggest loser as it fell 6.5% because of the revenue miss I discussed in a previous article.

Surprisingly, even though it seems like the S&P 500 has been doing amazingly, the 14-day RSI is only at 63.63 which isn’t as high as the recent peak in late August or anywhere close the January peak. That’s because it still includes the decline every day in the first week of September. If the market keeps increasing for 5 more days, it will have an extremely high RSI.

The CNN Fear and Greed index is already showing a bearish signal as it increased from 71 to 74 putting it one point away from extreme greed. It’s now at greed. After Micron’s earnings report, we now have 8 firms with their Q3 results out. 7 out of 8 firms beat their EPS estimates and 4 out of 8 beat their sales estimates.

EPS growth is below Q2’s rate, but still strong.

Communication Services – New Sectors Shift FANG

The best sectors were consumer staples and technology which increased by 1.16% and 1.17%.

The only down sector was energy which fell 6 basis points. This week is the last one with these sectors. As you can see from the chart below, technology, consumer discretionary, and telecom will lose their weighting and the communications sector will be created.