We have a normal economic calendar. Tuesday’s election will take center stage. Markets have less than expected interest in the election. Partly this reflects confidence in a split outcome, with no major policy changes.
I expect pundits, especially if encouraged by early-week trading, to focus on the signals from volatility and markets declining below technical support. Many will be asking: How should we react to these storm warnings?
Last Week Recap
In my last edition of WTWA I guessed that the punditry would move away from daily attempts to interpret market moves and look more closely at the upcoming mid-term elections. That was mostly wrong. There was enough daily volatility to maintain media attention. There were some stories on the election, but mostly of the “horse race” variety, not material very useful for investors.
The Story in One Chart
I always start my personal review of the week by looking at a great chart. This week I am featuring the futures chart from Investing.com. The image posted here shows a static view. If you go to the site, you can check out the news at various points during the week and adjust the view in many other ways. Since futures trade when the stock market is closed, you can also see those moves.
The market gained 2.7% and the weekly trading range was 5.8%. Both were extremely high. I summarize actual and implied volatility each week in our Indicator Snapshot section below.
Noteworthy
Congratulations to Josh Brown on his tenth blogging anniversary! Readers of “A Dash” are familiar with him as a source I frequently cite. Josh has a special role as a blogger committed to the interests of individual investors. I reviewed his first book (here) in January 2013 and noted the strengths of both has blog and his book. His traits are a guide for would-be-bloggers. They would need his honesty, talent, and ideas. Here is a conclusion from my review:
In our office we give Josh our highest accolade:We “unmute” the TV and back up the TIVO to hear what he has to say.
I have also frequently recognized him as a winner of the Silver Bullet award – taking an unpopular position that helps people see through the smog of bogus contentions.
Please read Josh’s eloquent post about what his writing has meant to him – especially the importance of readers and supporters. As one who has shared many of these experiences, I have a special appreciation for his comments. I have the same feelings toward my readers, supporters, and friends. You really cannot make it as a writer without this kind of encouragement.
I wish Josh another ten years and more!
[I have never spoken with Josh in person or on the phone. He is a blogging and email friend, but one who makes readers and correspondents quickly feel a personal connection.]
The News
Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.
New Deal Democrat’s high frequency indicators are an important part of our regular research. This week reflects some improvement in his regular three time frames, although long-leading indicators remain neutral.
When relevant, I include expectations (E) and the prior reading (P).
The Good
Employment showed strong growth. The WSJ had a good chart pack for “employment Friday.” The only negative for these numbers was the “good news is bad news” argument, that the Fed will proceed with the planned rate hikes.
- ADP private employment showed a gain of 227K for October. E 190K P 180K. (See Jill Mislinski for analysis and multiple charts).
- Initial jobless claims were only 214K. E 213K P 216K.
- Payroll employment registered a net increase of 250K. E 190K P 118K revised from 134K.
The Bad
Personal income for September increased 0.2%. E 0.4% P 0.4% revised from 0.3%. (Another revision effect; probably best to consider the two-month total). Personal spending was up 0.4%, in line with expectations. The Capital Spectator wonders, Has the Rebound in Consumer Spending and Income Peaked?
James Picerno writes:
True, the latest annual increases still align with a healthy trend, which suggests that the nine-year-old economic expansion will roll on for the near term. But yesterday’s results add more weight to the view that the Trump rebound has run its course and that something approximating a “normal” rate of growth – read slower – is coming.
The Ugly
The campaign. It is everywhere and seems different from past elections. Intensity of feeling and expression is high. Those whose minds are made up grasp at any statement as confirmation of their viewpoint. Facts are in short supply. The “undecided” are the chief targets of the avalanche of negative advertising and the record campaign spending. I ventured onto Facebook (which I use only for personal and family matters) and was amazed by what I read from friends and relatives.
