Oct 1, 2019 Jim Farrish DOWNSIDE

FINAL NOTES:

Tuesday: Not a good day for stocks as investors see the reality of a slowing economic outlook with manufacturing posting a second month of contraction in the sector. Reality is always present it is just a matter of how long it takes us to believe it. Hope is always the default emotion for investors following optimistic periods… the last default is reality. The economic picture has been slowing since last September… a year later some are starting to believe it. The prop or hope for the market is the Fed and liquidity. They are engaged, but is it too little too late? Watching and trading accordingly.

Monday: Solid gain for the broad indexes as we start the week on a positive note. There are plenty of question marks for the markets to deal with as we head to a week full of data from economic to earnings. Taking it one day at a time as the challenge remains for stocks. Earnings will be one big hurdle to jump as they start to report and analyst measure the impact of the tariffs and slower spending from the consumer.

Markets found enough buyers to break from the five-week trading range and make a run at the July highs. Test of the move deepened this week leaving plenty of question marks for me. Some pressure on Friday from the rumored discussion of delisting Chinese stocks from the White House. The close Friday left plenty of questions we addressed above. I continue to raise the question about the conviction behind the move. There is a test of the break higher, but I still have my doubts about the move. Thus, managing our risk. Small caps took on a leadership role on the upside and now doing so on the downside as buyers quickly abandon growth stocks. The treasury bonds took a hit as money rotated out of bond and yields climbed to 1.95%, but this week money found its way back with yields at 1.67%. The risk remains high for upside opportunities as the underlying data remains weak. The market remains controlled by headlines as each day holds movement related to the speculation of what might happen. Trade with China and the US remains at the top of the list with both making interesting statements. Throw in Brexit and other global issues and you get the picture. The economic data showed mixed news and earnings show impact to tariffs with specific sectors. There are still too many questions unanswered and that invites speculation and volatility. Speaking of volatility the index bounced back above 17 after a brief stay at the 13 level. We remain focused on what is working and what is failing. Therein lies the opportunities. Manage your risk accordingly and let this unfold… one day at a time.