I think that if I were to ask a random bunch of market watchers which month of the year is most likely to produce one or more dramatic downward moves, I’m pretty sure that more than half would say ‘October’. After all, ‘The Big One’ of 1929, known as Black Thursday, came on October 24th of that year. Black Monday, the other Big One, was October 19th, 1987.

Interestingly, when there are heart-stopping downdrafts in October, they are quite typically in the last part of the month. Conversely, if a big dip occurs early in the month, October often turns out to be net positive. But, does this mean anything? Is there something October-ish at play? Probably not. You have to squint very hard to look at the events leading up to the drops and see common causes. Indeed, the spookiness of the current market situation seems to have been created more by speculative fear than anything (much) that has actually happened. The dominant factual element is that there is a global economic slowdown. A secondary element is that Trump’s tariffs (now having been extended across the Atlantic) will put further drag on the econ picture. His belief is that it’s high time to put consequence to bad behavior, encouraging it to cease, and he’s willing to take some suffering in the process. Unfortunately, he will be sharing it with us. Meanwhile most leading economists are of the mind that even if the slowdown gets slow enough to fall into recession, it will be a short and manageable one. It’s good too that among these voices is that of Ben Bernanke, former Fed Chair under GWB and Obama so no one can claim it’s mere partisan pandering.

Also getting nearly everybody’s attention are the insanity-level political wars. No doubt this is not helpful for the investor world.

A couple of days ago Bernie Sanders suffered chest discomfort and ended up having a couple of stents installed. No one has confirmed an actual heart attack but (as far as we know) no one has denied it either. We do know that for the time being he has cancelled appearances and also a 1.6-million-dollar ad campaign that was supposed to have begun about now. Joe Biden is also having issues and is suddenly not the clear front runner that he had been.

Biden’s biggest advantage was the popular sentiment that he was the most ‘electable’ of all the Democratic candidates. This week, even before this week’s new problems, two separate polls have put Elizabeth Warren ahead of Joe. One must ask, is Warren becoming ‘electable’? The online betting sites have put her at better than 50/50 odds. And at 70 she has youth on her side. Biden is almost 77 and, if elected, Sanders would be 80 on Inauguration Day.

A word on employment: You may recall that last month the closely-watched non-farm payrolls report turned in a very low 130,000 jobs added. I say ‘very low’ because the expectation had been around 165K. Well, today BLS released its September numbers and in the report, they included this footnote:

“The change in total nonfarm payroll employment for July was revised up by 7,000 from +159,000 to +166,000, and the change for August was revised up by 38,000 from +130,000 to +168,000. With these revisions, employment gains in July and August combined were 45,000 more than previously reported.

The numbers for September are a mixed bag. The count of new jobs was weaker than we would like at 136,000 but our two-handed economist is quick to point out the unemployment rate fell to 3.5% — a number not seen since December 1969. So, the data, as a pair, should make both pessimists and optimists happy.

Ron’s Market Minute — Market Recession: Let Me Count the Headlines!

It is frustrating how the ‘news’ repeats itself. We have a couple of down days on the major indexes* and the bears come out with a recession forecast, then a couple of up days and they become quiet, then rinse and repeat, yada yada yada. I can hardly keep track of how many recessions have been forecast over the past 18 months. 

So, as we’ve said before, we are in the season of the year when historically we tend to see markets begin their’ stronger returns’ part of the year. Let me share a chart with you and highlight some technical stuff (stuff is a technical term) that may indicate that Ms. Market is ready to move out of the summer doldrums. For those of you who want the condensed summary, here it is: Thursday Stock Indexes print upside reversal near 200 day moving averages and August lows, technology sector leads the rebound, all sectors of the US market show gains. 

And for those of you who want the meat that goes with the summary, have a look at this chart of the Nasdaq index from today (about 8:30 AM AZ time).

After trading sharply lower Thursday, stocks reversed upward to show an upside reversal day.  AND this happened at some critical support levels.  The Dow Index* bounced off the 200-day moving average and support around the August lows, the S&P Index* reversed from chart support near its August low, and the Nasdaq composite Index* bounced off of its 200-day line and its August low.

The Nasdaq was likely the most important because the (highly tech-oriented) Nasdaq has been leading the retreat over the past two weeks. It was Thursday’s biggest gainer.  Note also the bounce in the RSI at the lower level where it often shows a potential bottom and the start of an upturn.

SO…right now the major indexes need to show some follow-thru to build on yesterday’s successful test. We’re looking for the indexes to clear Thursday’s gap, and also the 50-day moving average. At that point we’ll be ready to declare that the summer ugliness is most likely over.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw@denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

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*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.