Stocks End Week & Month Mixed

The market ended the week and month mixed which is a “good” sign considering September is usually not a good month on Wall Street. The Dow Jones Industrial Average and the benchmark S&P 500 ended the month higher while the Nasdaq and small-cap Russell 2000 ended slightly lower. For the year, the Nasdaq and Russell 2000 are the leading areas in the market while the Dow and S&P 500 are lagging. Therefore, the fact that we are now seeing big money rotate out of the leading areas and into the lagging areas is a good sign. Why? Because it gives the leading areas a chance to consolidate the recent run while the under-performing areas rally. The key now is to analyze the health of the consolidation and make sure it is a normal healthy consolidation and not something more severe. The one worrisome point is that the Russell 2000 broke below its 50 DMA line which is not ideal (since that area has served as support for the past few months). If the selling intensifies that could drag the other indices lower. If not, then this will just turn into a blip on the radar.

Monday-Wednesday Action:

On Monday stocks ended mixed as the Nasdaq edged higher but the S&P 500 and the Dow Jones Industrial Average both fell. The big headline of the day came after rumors spread that Deputy AG Rosenstein would leave his position. Separately, Sirius XM bought Pandora for an all-stock deal and Barrick Gold bought Randgold. Those were two big mergers that were announced. On Tuesday, stocks ended mixed and were quiet most of the day as the Fed began its two-day meeting. Separately, President Trump said at the United Nations General Assemble the U.S. “will no longer tolerate abuse” on trade and said, “we will not allow our workers to be victimized, our companies to be cheated and our wealth to be plundered and transferred.” On Wednesday stocks fell after the Federal Reserved raised rates by a 1/4 point and raised its economic outlook. The FOMC also forecasted one more rate hike before the end of the year and three hikes in 2019.

Thursday & Friday Action:

The market rallied on Thursday after the bulls showed up and sent stocks higher. Facebook, Alphabet and Twitter were some of the stocks that helped the market rally.  Stocks were quiet on Friday during the last trading day of September. In company specific news, shares of Tesla plunged after the Elon Musk decided not to settle with the SEC. In an unrelated event, share of Facebook fell after the company said there was a security breach that may have impacted 50 million users. Separately, Mexico and the U.S. are set to release a bilateral agreement, renegotiating NAFTA which does not include Canada. 

Market Outlook: Bulls In Control

Once again, the Russell 2000 broke below important support and should be watched closely. For now, the other major indices are all above their respective 50 DMA lines which is healthy for now.  Most recently, in August, they showed up and defended support (50 DMA line) which was a big sign of strength. After the 50 DMA, the next big level of support is the 200 DMA line, then February’s low. For now, as long as those levels hold, the longer-term uptrend remains intact. Conversely, if those levels break, look out below.  As always, keep your losses small and never argue with the tape.