Thoughts {10.29.18}

A quick note as the markets open higher today.  I think there's a higher probability that stocks find some footing this week.  Now understand that finding  a level where maybe we stabilize and then start to rally are two separate things.  We may churn around a bit now till after the elections but after that conditions could be better for a rally into the end of the year.  

By then the earnings season will be over and so far they've been decent.  October also will end a certain amount of tax loss selling from institutions that close out their books this quarter.  Finally with earnings season over, corporations that have stock buyback programs in place will be free to go back into the markets.  Finally we'll shift over from the traditional season of weakness in the markets to a period where money flows favor stocks.  Now, of course, none of this has to happen.  Maybe the news will continue to be in the negative  and we'll find any rally in stocks capped.  What I'm saying is that certain things that have been headwinds in the past few months will either now be at our backs or be less of an issue.  Time will tell.

Markets may be capped by their old highs from a few months ago for a longer period of time than some right now might think.  More about this when I can throw out a chart on this blog sometime later in the week.

Usually what often causes a decline in markets are either unexpected events that suddenly show up or an event or series of events that suddenly become bigger concerns in investor's minds.  As the dust clears from this decline it seems to me that the unexpected quick rise in interest rates in September was the key that knocked the market off of its stool  I think that adding that on top of our trade issues with China and perhaps a slightly lower level of growth next year than investors previously expected is what did the trick.  Now it's all about the markets deciding whether they've discounted these things enough for stocks to begin a leg higher.  Probability would suggest we're close.

The one thing that might not be factored into the markets would be a massive Democratic victory in next week's elections.  A Democratic win that gives them solid majorities in both the House and Senate might cause markets to question the longer term sustainability of the Trump Administration's ability to enact business friendly policies going forward.  I'll be watching the results closely next week.  

Back now Wednesday.