Scott Martindale
By Scott Martindale
President, Sabrient Systems LLC

It is encouraging to see that Q3 earnings season is looking a bit better than expected and is on track to produce positive earnings growth for the first time since Q1 2015 (that was six straight quarters of negative year-over-year growth!) – and on positive revenue growth, to boot. Entering earnings season, Wall Street’s mood had turned negative after an expectation earlier in the year that Q3 would be the big turnaround quarter, so the upside surprises so far have been most welcome.

On the other hand, stocks appear to be enduring something of a “stealth correction” or risk-off activity, which has been impacting small caps much more than the larges. After seven months of expansion (essentially from Feb 11 until Sept 22), market breadth has been shrinking over the past month, as news headlines take the stage away from fundamentals, which is not surprising given the impending election. I think we will see elevated volatility in advance of election day, but after rationalizing what it all means (no matter what result transpires), I expect the market to stabilize – at least until the December 14 FOMC meeting. From a technical standpoint, the proverbial spring remains tightly coiled for a significant move. But even if the initial move is down, I would consider it a buying opportunity, as I think investors will return to a focus on fundamentals, leading once again to healthier market breadth and diverse leadership, with higher prices in our future.

In this periodic update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable ETF trading ideas. Overall, our sector rankings look relatively bullish, although the sector rotation model still suggests a neutral stance. Read on.... Read more about Sector Detector: Earnings looking good and bullish rankings hold steady, but news is now trumping fundamentals

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By Scott Martindale
President, Sabrient Systems LLC

Overall, it appears that the stock market continues to focus more on improving fundamentals than on the daily news. We continue to see improved market breadth, low volatility, lower sector correlations, and capital flows into higher quality companies with solid fundamentals, attractive valuations, good earnings quality, and strong market position. Small and mid-caps have been leading market segments, especially those from the Energy sector. Among large caps, Technology and Financial sectors have been strong during Q3, while defensive sectors Utilities and Telecom have pulled back across all market caps after showing inordinate strength for much of the year (although they still remain strong YTD).

All of this is bullish – and is illustrative of the healthy broadening of the market. Although some traders appear to be taking some chips off the table in deference to September’s notoriety as the worst performing month of the year, I think the path of least resistance for stocks is to the upside.

In this periodic update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable ETF trading ideas. Read more about Sector Detector: Healthcare struggles under election campaign attacks, while Tech, Financial, and Small Caps lead an overall bullish market