Early signs showed that stocks might rebound and the extension to prevent a shutdown may become support, but as the open nears this morning it is not that clear. Truth is there are a lot of additional things to consider. Let’s look at the top three and how to potentially exploit this momentum stall.

First, we are heading into Q3 earnings and that will be a huge indicator for how well companies are stomaching a fraught economy. Financial stocks will be a key factor to see how mid size banks are fairing. Most have overlooked them with the assumption the crisis was averted but they aren’t out of the woods yet.

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Also, the auto workers strike is continuing and it is testing the big carmakers ability to stomach this disruption. This is on the heals of the writers strike and shows that while companies are facing higher cost for capital in the form of jacked up interest rates, they are also getting squeezed by the workforce demanding more. This autoworker strike is symptomatic of a much bigger issue.

Lastly, the shutdown itself tells us we don’t have a consensus on what will happen with government spending. 45 days dodges one bullet but there seems to be machine gun fire coming at the challenge to keep government open.

All of this is to same things are a bit fragile. If you can find a single needle in the haystack in the form of a stock that is going to breakout, grab it with caution. The broader trend is likely to be range locked for a bit and it wouldn’t take much to feed the bears and push for a farther decline.

Short term trades and smaller positions are smart moves as we head toward the end of the year.

Keep learning and trade wisely.

John Boyer


Market Wealth Daily