Big Picture, Market Analysis

Pullback Mode Remains the Theme in Short-Term

sideways stock chart

My general theme of pullback mode for stocks continues in all of the major indices except for the NASDAQ 100. Gold and silver have been a more exciting story, but they, too, have paused since I wrote about them last week. Sector leadership remains very strong with semis, banks, transports and energy near their highs at the same time the defensive group has been weak.

I wrote about consumer staples looking especially troubled a few weeks ago and nothing has changed. They had been dynamite all year and became very expensive on a fundamental basis during the first half of 2016. Since then, their price behavior has been poor as it looks like big money has been quietly selling the rallies.

On the bond side, treasuries have been hit with the ugly stick and they are approaching an area where they are “supposed” to at least bounce. If they cannot, I would begin to argue that much lower prices are ahead and into 2017. High yield, on the other hand, just scored yet another new high last week. This continues to give me comfort that a bear market scenario remains off the table for a while.

With Yom Kippur beginning at sundown today and lasting through sundown tomorrow, I would expect liquidity to dry up later today as well as tomorrow. That could make for a quick exaggerated move. Finally, the old adage of Sell Rosh Hashanah and buy Yom Kippur ends tomorrow. Stocks are now about to begin the most favorable time of the year.

Paul Schatz is President and Chief Investment Officer of Heritage Capital, LLC, in Woodbridge, CT. and a Managing Partner at Numetrix Capital, an investment research firm focused on multi-manager, multi-strategy portfolio solutions.

Paul Schatz


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