Momentum in Dow Jones investing was driven by corporate earnings beats in machinery and airline stocks. Intraday charts showed buying interest around support levels near 38,500, while implied volatility stayed moderate, indicating controlled risk sentiment. When back-tested to 1970, the Warren Buffett indicator has averaged a reading of about 85%. This means the aggregate value of all publicly traded stocks in the U.S. has, on average, equaled 85% of the total value of U.S. GDP, when looking back 55 years. This week marked the end of September and the start of the fourth quarter. As the great Dave Johnson would say, “And Down the Stretch They Come!!!” September has historically been the weakest month of the year - down an average of 2% over the past 10 years. We bucked that trend this year though, with the S&P up 3.5%. As for the third quarter, the S&P 500 was up 8%, but the small cap-focused Russell 2000 did even better, up 12%. Turning to this week. The federal government closed if you hadn’t heard. So far that's had limited impact on markets. Despite all of that the S&P went on to post another batch of record highs, as did the Dow and the Russell 2000. You know what else set records and shut things down? NY Yankees flamethrower Cam Schlittler in the playoff series win versus the Red Sox. The S&P 500 rose every day this week (just barely on Friday). At the Closing Bell on Friday the S&P was up 1% for the week. The equal-weight outperformed, as did small caps, in a sign of healthy breadth continuing supporting the continued move higher. However, the index is very extended from its moving averages. Healthcare is easily the best performing sector this week. The XLV rose 7%. That strength was triggered by significant news flow from Pfizer’s announcements with the White House around drug pricing. Utilities outperformed, benefiting from lower rates, M&A and a constant flow of datacenter investment news. Tech was also a leader, with semis strong as memory chips took the spotlight from GPUs. Materials were middle-of-the-pack but mining stocks were mostly higher across commodities. Thematic and higher risk areas of equities also showed significant strength. Oil was under pressure while precious metals and crypto caught a bid- gold hit another record high. Treasury yields were down ~5bps across the curve, reversing much of last week's move higher. Next week's calendar was going to be pretty light even before the shutdown put all the federal data on the backburner. OPEC will meet over the weekend, with reports suggesting another increase in production. The Univ. of Michigan survey is out Friday, the Yankees take on the Blue Jays and the NHL regular season gets under way. Have a great weekend. The Dow Jones investing forecast includes cautious optimism as corporate buybacks ramp up. Treasury yields stabilized, offering relief for dividend-heavy stocks. Chart patterns indicate a potential ascending triangle formation, which could lead to a breakout above 38,900.
