Positive news from the ISM Manufacturing index at 56.2 vs 55 – not much effect on the market as the government overhang remains the focus. New orders were not very good however in this report; employment did look good. Full report here.
"The PMI™ registered 56.2 percent, an increase of 0.5 percentage point from August's reading of 55.7 percent. September's PMI™ reading is the highest of the year, leading to an average PMI™ reading of 55.8 percent for the third quarter. The New Orders Index decreased in September by 2.7 percentage points to 60.5 percent, and the Production Index increased by 0.2 percentage point to 62.6 percent. The Employment Index registered 55.4 percent, an increase of 2.1 percentage points compared to August's reading of 53.3 percent, which is the highest reading for the year. Comments from the panel are generally positive and optimistic about increasing demand and improving business conditions." …
As no budget resolution came to pass this weekend (surprise surprise) futures are solidly down in the U.S. and most world markets are following suit. Even before this morning's drop the S&P 500 had dropped about 2% straight in a slow steady drip since a week ago Wednesday when euphoria was at its highest post Fed announcement. It has been a strange month – the S&P 500 was up 11 of 12 days in a row up, through that Wednesday and barring a big reversal later today will be down 7 of 8 sessions. Technically we have a bearish MACD crossover in the S&P 500 here.
Bigger picture, the S&P 500 has moved a lot since early July but …
We have an interesting set of divergences in the major indexes – the S&P 500 is starting to pose some issues as it fell back below the early August highs and this morning is breaking below the 38.2% retrace level of the September rally that it held yesterday. We also have what, if nothing changes later today, is a bearish MACD crossover.
Meanwhile the NASDAQ and Russell 2000 are …
Rare as a dodo in 2013 are any form of long losing streaks; recall how long we entire early part of the year without so much as 3 down days in the DJIA. Yesterday's reversal late in the day pushed stocks into the red again and we now have the first 5 day losing streak of the year. After being extremely overbought last Wednesday after the Fed surprise announcement the indexes have now worked off that condition. As you can see in the chart below the S&P has now retraced 38.2% of the September rally.
With the demise of Larry Summers, all eyes point to Janet Yellen as the next Federal Reserve head. Frankly it is a bit surprising she was not the leading candidate all along. Earlier this year, we posted a NY Times piece on the woman [Apr 25, 2013: NY Times Does Janet Yellen] from a more personal level and now we have one on the Fed whisperer himself, Jon Hilsenrath – more specific to policy and personality. From the description, Yellen is far more like Greenspan than Bernanke. Some excerpts: