The S&P 500 futures are down 7 points and are trading 0.2% below fair value. The NASDAQ 100 futures are down 49 points and are trading 0.3% below fair value. The Dow Jones Industrial Average futures are down 29 points and are trading 0.1% below fair value.
Equity futures point to a lower open to start the week. Participants are waiting to see how the market responds to Friday’s sell-off and are hesitant in front of Wednesday’s FOMC policy decision. The market is not expecting a rate hike and will be more focused on the updated Summary of Economic Projections and the tone that Fed Chair Powell takes at his press conference.
Separately, the UAW strike persists, with Bloomberg reporting that a Stellantis (STLA) offer to increase pay by nearly 21% over four years, with a 10% immediate increase, has been turned down by the UAW.
Also, House Republicans presented a short-term bill that would avoid a government shutdown until Oct. 31, according to Reuters.
Treasury yields and oil prices are moving higher this morning. The 2-yr note yield is up one basis point to 5.05%, and the 10-yr note yield is up one basis point to 4.34%. WTI crude oil futures are up 0.5% to $91.26/bbl.
(Michael Gibbs, Managing Director, Lead Portfolio Manager
The S&P 500 sold off heavily on Friday, and some of the selling was due to a quadruple witching in the options markets. The index closed at 4450.32 and below the 50-day moving average at 4454.37, and the RSI index closed below 50, triggering a sell signal. Also, the Federal Reserve meets on Wednesday, and we feel most traders will remain on the sidelines until the interest rate decision is announced.
We are currently Intermediate-term bullish and short-term bullish.
John N. Lilly III CPFA
Accredited Portfolio Management Advisor℠
Accredited Asset Management Specialist℠
Portfolio Manager, RJFS
Windsor Wealth Planners & Strategist
Futures trading is speculative, leveraged, and involves substantial risks. Investing always involves risk, including the loss of principal, and futures trading could present additional risk based on underlying commodities investments.
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and changes of price movements.
The advance/decline line (A/D) is a technical indicator that plots the difference between the number of advancing and declining stocks on a daily basis. The indicator is cumulative, with a positive number being added to the prior number, or if the number is negative, it is subtracted from the prior number.
The A/D line is used to show market sentiment, as it tells traders whether there are more stocks rising or falling. It is used to confirm price trends in major indexes and can also warn of reversals when divergence occurs.
The percentage of stocks trading above a specific moving average is a breadth indicator that measures internal strength or weakness in the underlying index. The 50-day moving average is used for short-to-medium-term timeframes, while the 150-day and 200-day moving averages are used for medium-to-long-term timeframes. Signals can be derived from overbought/oversold levels, crosses above/below 50%, and bullish/bearish divergences.
The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S stock market. Past performance may not be indicative of future results. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investors’ results will vary. Opinions expressed are those of the author John N. Lilly III, and not necessarily those of Raymond James. “There is no guarantee that these statements, opinions, or forecast provided herein will prove to be correct. “The information contained was received from sources believed to be reliable, but accuracy is not guaranteed. Investing always involves risk, and you may incur a profit or loss. No investment strategy can guarantee success. The charts and/or tables presented herein are for illustrative purposes only and should not be considered as the sole basis for your investment decision. International investing involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in well-established foreign markets.
This is not a recommendation to buy or sell any company’s stock mentioned above.
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Bond prices and yields are subject to change based on market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. Holding bonds to term allows redemption at par value. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall, and when interest rates fall, bond prices generally rise.
The Nasdaq 100 (^NDX) is a stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. It is based on exchange, and it is not an index of U.S.-based companies.
Quadruple witching is an event in financial markets when four different sets of futures and options expire on the same day.
Futures and options are derivatives, linked to underlying stock prices. When derivatives expire, traders must close or adjust positions. That can trigger significant volume and order flow. The four types of derivatives expiring on quadruple witching are: