Market Brief - October 15, 2023
Welcome to The Predictive Investor Market Brief for October 15th, 2023!
Stocks were up modestly last week, as events in the Middle East put downward pressure on what would have otherwise been a very bullish week. Q3 earnings season is underway, with 11 of the 12 S&P 500 companies who reported last week beating consensus EPS expectations.
As for geopolitical risks, the market is assuming this will be a relatively contained conflict. Whether that’s how this unfolds is anyone’s guess. But clearly this conflict represents the biggest risk to the market/inflation by way of energy prices.
Weekend Reads
Investing Red Flags: A quick list of common warning signs: A great way to learn what to avoid in business and investing is to understand what a good short seller would look for. (Sapient Capital)
The Excitement, Danger, and Unknown of Small-Cap Investing’s Comeback: Small caps look cheap and, according to research by Schroders, have historically outperformed large caps during recessions and recoveries, returning an annualized 9.9 percent compared with 4.9 percent. (Institutional Investor)
Column: The economy has been strong. Why are economists so eager to predict it will tank? To be fair, long-range projections can be reasonably instructive, viewed with the proper horizon. But economists and their followers in the financial press are addicted to the shorter range, which often tells us nothing or is flagrantly misleading. (Los Angeles Times)
It’s official: The era of China’s global dominance is over: In the past, whenever it seemed like a recession was on the horizon, the CCP came to rescue. There's no hefty stimulus coming this time. Nor will the explosive growth that experts once expected from China return. Beijing's relationship with the outside world is no longer guided by the principles of economic rationality, but rather its yearning for political power. (Business Insider)
Market Technical Analysis
S&P 500 (SPY)
We began the week with improving breadth and momentum signals. SPY rallied and attempted to fill the gap between $436-$438 created on September 21 as expected, but failed mid-way through. This was significant because the gap is at the neckline of a head and shoulders top pattern, and is just below the 7/27 AVWAP, which has been a point of resistance since the market topped in July. This likely means further consolidation ahead, with the 200 day moving average serving as support.
