Monday Delivered the Long-Awaited Test of the October Lows

Excerpt from Louis Navellier's Marketmail - 11/13/2018

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Monday was a holiday throughout much of the land, and Wall Street had relatively low volume, but the market finally tested its October lows Monday, with the Dow falling 602 points. The good news is that we didn’t have the kind of machine selling we had in October. This selloff was much simpler. An Apple supplier issued lower guidance, so sellers shot Apple, but big tech stocks will continue to have strong sales and earnings. Basically, everyone is over-reacting. Many energy and retail stocks were up, after being hit on previous days, because good stocks bounce. We’re still in a “washing machine” cycle. Some of the decline is related to lingering election uncertainty in several recounts, but I believe NVIDIA’s earnings announcement Thursday could boost the tech sector, along with announcements of more share buybacks

Normally, as earnings announcement season winds down, the last few S&P 500 sales and earnings reports tend to show sub-par results. However, the last few corporate third-quarter sales and earnings announcements have gotten stronger. Amazingly, with over 85% of the S&P 500's earnings announced, average sales growth has accelerated to 10.3% and average earnings growth is now running at a stunning +28.9%! Many companies are lowering their sales guidance, but I suspect they are really just trying to lower analyst expectations so that they can surprise us again during the next announcement season.

Naturally, the big news last week was Tuesday's mid-term elections and, for once, the pollsters were correct. The GOP picked up some seats in the Senate (two of which are being contested in recounts), while the Democrats gained 35 to 40 seats in the House of Representatives and some Governorships. 

I'll have more to say about the election later, but other than infrastructure spending and maybe more drug pricing reforms, I don't expect a lot of meaningful progress out of Congress over the next year or two.

In This Issue of Marketmail (Click Here to Read)

The bond market is telling us there is no recession in sight, says Bryan Perry, while the oil price says inflation is no threat, either. Gary Alexander hails “gridlock” returning to Washington, along with free trade after the fall of the Berlin Wall, promoting global growth since 1989. Ivan Martchev sees China’s slow growth as the catalyst in oil’s recent price dip, as Beijing is running out of policy tools to prevent a steep recession there. Jason Bodner sees new sectors leading the emergence from October’s market turbulence, while I will expand on the subjects of political gridlock and the long-term outlook for lower inflation.

Income Mail:  

A Downbeat Bond Market is Heeding Upbeat Fed Rhetoric

           By Bryan Perry

Low Oil Prices Might be the Inflation Hedge the Bull Market Needs


Growth Mail:  

The Stock Market Endorses a Return to “Gridlock” in Washington, DC

           By Gary Alexander

The Wall to End All Walls Fell November 10, 1989


Global Mail:

Oil Breaking $60 is Likely Due to China

           By Ivan Martchev

Is This China’s Tipping Point?


Sector Spotlight:

Rebirth Follows Devastation: Always Has, Always Will

           By Jason Bodner

Some New Sector Leaders Begin to Emerge


A Look Ahead:

Markets Like Mid-Term Elections and Gridlock

           By Louis Navellier

Inflation Statistics Wax and Wane but the Trend is Flat