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Weekly Market Recap Oct 01, 2017

Courtesy of Blain.

This past week was almost a carbon copy of the prior week – 4 days of gains offset by 1 day of mild losses.  The bulls continue to own 2017.  Importantly, small caps saw a second strong week in a row after being the laggard of the year — so a healthy rotation continues throughout the market.  Even a “hawkish” speech by Janet Yellen on Tuesday could not slow down this train:

Investors shruged off comments from Federal Reserve Chairwoman Janet Yellen, who cautioned against moving too slowly on interest rates. Yellen said there is a risk that the labor market could become overheated, causing an inflation problem down the road.  In lengthy remarks, Yellen said she still thinks this year’s low inflation is “probably temporary” and that inflation will likely rise to reach the central bank’s 2% target “over the next few years.”

“The tone of her comments is cautiously hawkish,” said Ward McCarthy, chief financial economist at Jefferies & Co.   Market expectations for a rate increase in December, observed from the prices in Fed funds futures, moved up to 76%, according to CME Group’s FedWatch Tool.

Wednesday, small caps surged 1.9% to close at 1,484.81 — marking the biggest one-day percentage gain since March 1 as Republican leaders unveiled a plan to overhaul the U.S. tax code that looks to sharply reduce tax rates on businesses and many individuals.

“We shall wait and see how Trump’s plans evolve into legislation,” said Deutsche Bank’s strategist Jim Reid in a note on Thursday. “Our U.S. team’s early take is that they see a prospect of some reforms occurring at the corporate level (particularly for small corporates), but the potential for substantive reform of personal tax is much lower.”

The S&P 500 gained 0.7% over the week and 1.9% over the month, and 3.9% for the quarter.  This is the 8th consecutive quarter of gains!!  The NASDAQ rose 1.1% over the week and is up 1% over the month, while its quarterly gain is 5.8%.  The Russell 2000 climbed by 2.8% over the week and 6.1% over the month. Over the quarter, it is up 5.4%.

Orders for durable goods rose 1.7% in August, beating forecasts for a 1% rise.  Personal income rose 0.2% in August, while consumer spending was up 0.1%.

Transportation stocks have had a great September.

The homebuilder ETF had a great week as KB Homes (KBH) surged Friday post earnings.

Here is the 5 day weekly “intraday” chart of the S&P 500 .. via Jill Mislinski.

Fantastic chart here from Visual Capitalist showing why Google and Facebook are taking over the damn world!  Here is global advertising revenue by company since 2012 – look at this growing dominance by these 2!  Google now gets 88% of revenue by advertising while Facebook is at 97%!  Looks like “Chinese google” Baidu is surging to be #3 soon enough.

The week ahead…

It’s been a great year for investors thus far and despite the pitfalls of October over the years, the fourth quarter has traditionally been the market’s best.  Since 1950, the S&P 500 has gained 3.9% on average in the fourth quarter, advancing 79.1% of the time.

The key report for the week is of course the employment data out on Friday; it could be a bit wacky due to the effect of the hurricanes.

The September employment report (Friday) was probably affected heavily by the disruption caused by Hurricanes Harvey and Irma,” Capital Economics economist Paul Ashworth said in a note. “We estimate that payrolls increased by only 100,000, about half of the gain we would have expected in the absence of the hurricanes.”

Index charts:

Short term: The S&P 500 tread water to let it’s 20 day moving average catch up, then shot up again Friday.  The NASDAQ finally broke over old highs Friday.

As discussed above, it was a big week for the Russell 2000.

The NYSE McClellan Oscillator remains in all systems go territory.

Long term: The 5 year charts remain in unicorns and butterflies mode for bulls.

Charts of interest / Big Movers:

Micron Technology rose 8.5% Wednesday, a day after the chip maker reported better-than-expected earnings.

Thursday, Roku (ROKU) soared 68% in its trading debut, after its initial public offering priced at $14 a share on Wednesday.  Here are five things to know about Roku.

Roku sells three things: its streaming hardware that works with TVs, advertising, and its partners’ content sold through its software. Roku lists the last two on that list under “platform revenue,” a segment that is growing while hardware revenue seemingly stalls.  The company’s net loss for the second quarter of 2017 widened to $15 million from $14 million in the year-earlier period, on sales of $99.6 million.  Platform revenue jumped 91% to $43.1 million in the first six months of 2017.

Blackberry (BBRY) jumped more than 13% Thursday after a surprise profit and revenue beat.

Biotech stocks can chop your fingers off in a second but moves like Zogenix (ZGNX) on Friday – when it rose a cool 172% are why people continue to play their hand!  Shares soared on news of a positive trial for its drug to treat a rare type of epilepsy.

Spectrum Pharma (SPPI) likewise had a great week, up 49%.  The biopharmaceutical company primarily focuses on cancer and blood-based disorders; the stock rallied in response to some surprising early stage data for a potential new lung cancer drug.

Have a great week and we’ll see you back here Sunday!


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