Japan surprises market with stimulus helping market end October on a high note

By Justin Turner CIM, DMS®, CFP®
After a surprise stimulus move by the Bank of Japan, global markets around the world enjoyed a nice rally to close out the month.

The Dow Jones was up 195 points, S&P 500 up 23, and the TSX closed up 154.  After being down as much as 10% on the S&P 500 on October 15 and 13% for the TSX markets have stormed back and have recovered most of the losses although US stocks have clearly outperformed.

Energy companies led today in US with Exxon Mobil and Chevron Corp both rising 2.4%. Very telling with the price of oil down all day.  Gold and Silver slid to the lowest level since 2010. Gold broke through the $1180 low to settle at $1171 meaning there could be more pain in store.

Markets on fire after short lived correction

By Justin Turner CIM, DMS®, CFP®
Markets around the world continue to comeback after a correction that caused investors to fear that the multi-year rally was finally over.  Things have turned around in a hurry though and just a short time later it seems like the correction never happened. We are just one day before the conclusion of the FOMC meeting and US stocks tracked higher all day. DJIA finishing 187, S&P up 23, Nasdaq up 78 and Russell 2000 up the most with nearly a 3% move higher.

Consumer confidence was the big driver as the Conference Board’s index climbed to 94.5, the highest level since October 2007. Americans more excited about the prospects for jobs and the fact that gas is much cheaper and they have more money to spend. The S&P is now only 1.7% away from the previous peak of 2019 on Sept 19. 

      The TSX finished the day up 155 and closed right on the roof on increasing volume. The next obstacle for the TSX will be the 200 day ma which comes in at 14,687.  The TSX was down 13% on October 16th but is currently down only 6.8%.  

Market turns from mild correction to signs of Panic

By Justin Turner CIM, DMS®, CFP®

Is this the big one? Or will this be another correction of the variety we have seen over the past few years?  Many have been expecting a 5-10% correction since mid-summer.  10% would equate to 1810 on the S&P 500.  It would not be surprising us to see the S&P 500 fall another 40-50 points which would take us to around that level.  What has been the surprise is the quickness of the decline which has been remarkable as complacency has given way to fear.  The TSX has been worse with a decline of over 10% already and many fear more is in store.

The good news is we don’t see this as a signal the bull market has ended.  Global economic growth, based on the reduced IMF forecast is down from 4.0% to 3.8% for 2015, but 3.8% is still the best pace we have seen since economies rebounded in 2010/2011.  China’s economy isn’t stopping (they just had one of their highest oil import months), India is getting better.  Oil at $81 dollars has a big positive impact on oil importing economies including the US, China, India, Europe (ok, not great for the TSX).  The US consumer has de-levered (household debt to disposable income of 114% in 2009 to 90% today), wages are starting to rise, unemployment is still falling.

So if you agree it’s a correction, not the beginning of a bear market, then what to do?  Corrections don’t stop at 10% necessarily (that would be too convenient).  There is certainly some value out there and some quality names that have been beaten down.  We don’t know when the correction will end, but there are some indicators that this selling may be getting tired.  Nonetheless, doing some buying now and potentially some later will be our approach.

When panic looms, the fundamentals go out and sentiment and technicals tends to rule.  Some of those factors are currently very at the bearish levels that have coincided with past market bottoms.

Markets off to a rough start in October

By Justin Turner CIM, DMS®, CFP®
It has been all doom and gloom over the last week highlighted by protests in Hong Kong and the first North American Ebola case.   The TSX has given back about half of its 2014 year to date gains and the S&P 500 has done just about the same.  That leaves many of the major indices at important technical levels, and further downside could signal real trouble for equity markets around the world.

With the American economy still improving and with rates still at all-time lows, it doesn't feel like this will be the end of the rally but nothing can be ruled out.  Look for the S&P 500 to stay well above the 1900 level or a much deeper correction could materialize.