Date: September 26, 2016

Post-FOMC Sell Continues as Does Pullback Mode

Our post-FOMC sell signal from Thursday’s close remains in place. That short-term trade will end this week.

Stocks begin the week on the defensive as Europe and Asia are showing red. The media will likely blame it on pre-debate jitters, but that’s just nonsense. Pullback mode remains in place as it has been for the past few weeks. As I keep mentioning, it should not be a big deal. The Dow and S&P 500 continue to be the weak sister indices while the NASDAQ 100 and Russell just hit new highs last week. Additionally, the NYSE Advance/Decline Line also just scored yet another all-time high.

Of the four key sectors, semis and transports are the strongest with discretionary next and then banks which seem to be fickle. Telecom, REITs and utilities have resumed leadership, but I do not believe this will hold up into year-end. Rather, it looks like a temporary thing. Interestingly, staples are not joining that party which could mean more dire intermediate-term consequences before long.

High yield bonds are acting fine and treasury bonds have bounced back very well over the past two weeks. If treasuries are putting in a more significant peak, this rally should end soon with new lows seen by election day.

On a personal note, the world lost one of all all-time great sportsmen, the King, Arnold Palmer, a man who transcended golf and sports. Palmer and Jack Nicklaus had legendary battles with Arnie’s Army always overwhelming Jack’s fans. They were intense rivals who became the best of friends later in life. In all my years being a golf fan, I never heard a single unflattering rumor or story about Arnold Palmer. He would always go out of his way to help people and give back. A true role model.


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Paul Schatz, President, Heritage Capital