Risk On or Risk OFF? Tuesday Outlook from Wall Street Sector Selector
Courtesy of John Nyaradi of Wall St. Sector Selector
In our tightly knit world, the trends seem to ebb and flow around the globe like the tides.
Today the tide seems to be going out after the record setting September action and October could easily be setting up to retain its “scary month” status and a move to the “risk off” trade.
Earnings downgrades on Alcoa and Microsoft dampened the “animal spirits,” particularly at the start of a pivotal earnings season and with Alcoa set to kick things off with their report on Thursday.
On the macro level, the market has built in its hopes on “QE2,” the quantitative easing seemingly baked into the cake for the Fed November meeting, but Chairman Bernanke threw some water on that fire in a speech in Rhode Island today in which he said that current spending was unsustainable, that the economy faces real and growing threats and that while fiscal reform was needed, too much tightening too soon could derail the already fragile recovery.
And therein lies the rub, as the old saying goes.
Read the whole speech here:
http://www.federalreserve.gov/newsevents/speech/bernanke20101004a.htm
Tomorrow comes the all important ISM Services report which will give a peek into the health of the service economy.
For tonight, it seems to be “risk off” and Wall Street Sector Selector remains in the “Red Flag” mode, expecting lower prices ahead.
Disclosure: SH, SEF, VXX, SPY Put option
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