[Market Outlook] A Frightful October in the Markets

Will the November Seasonal Turn Happen? Read On… [Company Logo] A Frightful October in the Markets Will the November Seasonal Turn Happen? Read On… By Donn Goodman October 29, 2023 [image] Hello Gaugers. Hope you have weathered the volatile and negative stock (and bond) markets. We have described the negative cycle trends that can and do often take place in September-October. 2023 has certainly been amplified. As all of us are traveling to The Money Show in Orlando (and I am sitting in a flying cylinder as I write this), this will be a shortened version of Market Outlook for this week. We hope that maybe you will be attending The Money Show this weekend through Tuesday and we may even get a chance to visit. If you are at the Show, please track us down. Mish is also speaking at several panels, workshops, and presentations. Hope you can attend! As scary as Halloween can be, there is a lot going on around the world that may be scarier, including the economic uncertainty that plagues the United States at this time. October has exceeded the scary expectations many pundits had about the potential downdraft of this historically weak and negative season. So far in October, the major indices are down more than 3% month-to-date, with the Dow Jones down the least (-3.2%), the NASDAQ 100 (-3.6%) heavily influenced by the mega cap technology stocks (GOOG, NVDA, TSLA, MSFT, AMZ, AAPL and META-the Magnificent 7), who so far have reported better than expected earnings, except TSLA and GOOG which had mixed results. The S&P is down 3.9%, influenced by the 35% cap weighting of those same 7. The Russell 2000, the small cap index (IWM) is down over 8%, heavily influenced by the effect rising interest rates will likely have on these businesses, which are more dependent on financing and are more heavily leveraged than the cash rich mega caps. Interest rates most dramatic effect is on smaller companies. Last week we went into detail about the rise in interest rates and its potential effect on Price-Earnings ratios of the market and, more specifically, how analyst have to readjust their earnings expectations on companies including, cost of financing debt, inventory and reducing the leverage on their balance sheet as a result of higher interest rates. [image] During much of 2022 and now since July 2023, the negative pressure on the stock markets has been the rapid rise of interest rates (earlier this week the 10-year touched 5.0%) and the strong dollar as investors around the world chase the high interest rate returns of money market funds and short duration bonds. (Money market funds with assets well over $6 trillion continue to see huge inflows). See the 10-year rate rise (TNX) as well as the US Dollar (UUP) increase in the graph below: [image] There is a very distinct and clear (negative) correlation between a strong and rising US Dollar and the sell off in the stock market. See chart below: [image] Nowhere has this been felt more dramatically than small cap stocks which are underwater year-to-date by 7% or more. (The IWM small cap index is down 6.9% year-to-date). Let’s take a look at a few Russell 2000 (IWM) small-cap stock graphs: [image] So far, over the past 5 years, small-cap stocks have produced a 0 return. See graph below: [image] Large versus small cap stocks. As noted above, there is a wide divergence between large cap and small cap stocks. In her brilliant assessment of the inner workings of the markets through her Economic Modern Family, Mish often points out that without participation of Grandpa Russell, it is hard for the markets to stay positive. This could not be clearer in the recent collapse of small cap stocks and their large cap counterparts. This is one of the biggest divergences in a few years. See the charts below: [image] Folks, I urge you to talk with us about our Small- Midcap Earnings Growth SMART Investment Strategy. Year-to-date it is still up over 30%. Using MarketGauge Pro’s Active Risk Management (ARM), this strategy incorporates STOPS and PROFIT TARGETS. Through September 30, 2023 (some of this is hypothetical performance of the back test and some real time), the 5-year performance is 311.7% versus 4.8% for the Russell 2000 index before fees. Please reach out to Ben or me at [Benny@MGAMLLC.com](=) or [Donn@MGAMLLC.com](=) if you would like additional information. Tech stocks have held up better than the rest of the market. Use the links below to continue reading about: - Long-term trends and support - 10% corrections - Will we get a turn in November - The Big View bullets [Click here to continue as a free member]() [Click here to continue as a PREMIUM member](=) Best wishes for your trading, Donn Goodman CMO Market Gauge Asset Management [image] Every week we review the big picture of the market's technical condition as seen through the lens of our Big View data charts. The bullets provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral. Get started here and continue with the links below. Risk-On - There aren’t any significant Risk-On conditions this week Risk-Off - All major [US indices]() made new multi-month lows this week, however, all 4 indices are also oversold on both price and momentum according to RealMotion and may be subject for mean reversion next week. (-) - All 4 key indices have [worsening volume](=) with the Russell 2000 (IWM) being the only index with any accumulation days over the past 2 weeks. (-) - Every major market sector was down this week with the exception of [Utilities (XLU)](=), a clear risk-off indication. (-) - [Risk Gauges]() have fallen from a weak Neutral to Risk-Off readings. (-) - [Volatility (VXX)](=) continues to make new highs for the first time since August. (-) There's more... Use the links below to continue reading about: - Long-term trends and support - 10% corrections - Will we get a turn in November - The Big View bullets [Click here to continue as a free member]( [Click here to continue as a PREMIUM member]() Best wishes for your trading, Keith Schneider CEO MarketGauge P.S. When you’re ready, here are 4 free ways we can help you reach your trading goals… - [Book a call with our Chief Strategy Consultant](=), Rob Quinn. He can quickly guide you to the resources that you'd like best. - To discuss having assets managed by MarketGauge strategies, contact Ben Scheibe, at MarketGauge Asset Management at Benny@mgamllc.com - Get the foundational building blocks of many of our strategies from Mish's book, [Plant Your Money Tree: A Guide to Building Your Wealth](), and accompanying bonus training. - [Review quick descriptions]() of our indicators, strategies, services and trading systems here. [image] Get more - follow us here... Twitter [@marketgauge]() and [@marketminute]() and [Facebook]() To stop receiving this go [here.]() Got Questions?Office hours 9-5 ET (New York time) Email: info@marketgauge.com Live Chat: Go to bottom right corner of our [home page.](=) Call: 888-241-3060 or 973-729-0485 There is substantial risk of loss associated with trading any securities including and not limited to stocks, ETFs, futures, and options. Only risk capital should be used to trade. 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