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Is the S&P 500 rolling over or making higher lows?

It’s been one negative headline after another- FED Repo Operations, rumors of Chinese stocks being delisted in the US, Impeachment Inquiry…yet today’s recovery was impressive and widespread.  What I find ever more interesting is how Emerging Markets seem to be improving as the US is slowing.  For the past month, Emerging Markets have outperformed the S&P 500.

A pessimist would look at a chart of the S&P 500 and see a head-and-shoulders pattern forming, which would likely indicate a drastic downturn.  An optimist would see that for the entire year the S&P 500 has been making higher highs and higher lows, likely indicating a continuation of the rally.

Since I’m a cynic, and current investor sentiment is extremely bearish…I have to side with the bulls.

Today I added to my general positions in US stocks by purchasing more SPY, SCHB, and RYT.

I also sold KCE (at a loss) and used the proceeds to purchase stock in Charles Schwab Co (SCHW).  KCE is an ETF that tracks capital markets companies like investment management, investment banking and corporate finance.  It has performed poorly along with the general banking sector and even more so now that the investment industry is reducing or entirely abolishing trading commissions.  Schwab has also suffered, especially this week when they announced the elimination of most transaction fees on stocks, ETFs and options trading.  However, since Schwab is consistently gaining investor assets (now over $3 trillion) and it only derives 8% of its revenue from commissions, I think they will outperform smaller competitors in the KCE.  [DISCLOSURE: I’m not directly affiliated with Schwab but they are the preferred broker used by my firm…now that they’re offering FREE trades why aren’t you using them too?]

Despite today’s strong stock market performance, October is fraught with danger.  US-Chinese trade negotiations are scheduled to take place in Washington D.C. on Oct 10-11 and the BREXIT deadline is Oct 31.  As always, invest with caution.


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