Market Direction Weekly Closing Numbers©

Market Direction: BEARISH alert issued 10/27/2016

The economy

The stock market registered its second consecutive weekly decline as the looming election contributed to increased caution among participants.

With the presidential election coming up on Tuesday, participants saw no reason to rush into stocks, especially when confronted with last Friday's news that the FBI is once again investigating Hillary Clinton after a new batch of emails was uncovered. The news led to a tightening in polls while market participants who had priced in an easy Clinton victory were forced to adjust their positions.

The down week appeared to be on track for a higher close on Friday, after the S&P 500 resisted a move below its 200-day moving average (2083). However, the index slid from its high in afternoon action, but avoided a close beneath the 200-day average. The Friday volatility took place after the release of the Employment Situation report for October, which was mixed relative to expectations. Nonfarm Payrolls increased by a below-consensus 161,000 (Briefing.com consensus 175,000), but average hourly earnings increased at a faster-than-expected 0.4% (Briefing.com consensus 0.3%).

Although the upcoming election received a lot of attention, market participants also had to deal with the last heavy batch of third-quarter earnings. Facebook (FB) was one of the most notable companies to report, but its shares retreated as cautious guidance overshadowed better than expected results.

The busy week also featured the latest policy decision from the Federal Reserve, but to no one's surprise, the central bank held pat, showing little willingness to rock the policy boat ahead of the election. The policy statement did say that the case for a rate hike has strengthened, but the probability of a December rate raise declined, as indicated by the fed funds futures market. The implied likelihood of a December hike ended the week at 66.8%, down from last week's 74.2%.

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By the numbers the weekly closing index numbers compared to the initial BEARISH recommendation closing numbers: 

Stock Market Closing Numbers
compared to Recommendation Numbers
	10/27/2016	11/4/2016	Difference
Dow Jones	18,169.68	17,888.28	281.40
Nasdaq	5,215.97	5,046.37	169.60
S&P 500	2,133.04	2,085.18	47.86

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