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Equites ended higher in moderately volatile trading, perhaps the result of HFT. Averages are now at the upper end of their recent trading range. Will shares reverse course or will the advance continue?
Yesterday’s greatest advancers were the biotechs and energy. Oil was higher earlier in the session but ended about 0.9% lower on weekly inventory data that was greater than expected.
Today third quarter earnings season commences with the release of Alcoa’s results. Profits for the S & P 500 are projected to decline by 6.9%. To write the obvious, expectations are low.
I can argue if earnings surprise on the upside, the odds favors the averages breaking out of their recent trading range. If profits disappoint, the odds favor revisiting recent lows.
Will China’s market influence today’s trading as that market has been closed since September 30? As widely discussed, the surprising August 11 Chinese devaluation was/ is the catalyst for the recent selloff. The averages are still 4.5% below the date of the devaluation but many of the “most owned” and momentum names are down over 25%. The typical stock has been crushed.
Last night the foreign markets were mixed. London was up 0.35%, Paris down 0.03% and Frankfurt 0.11%. China was up 3.0%, Japan down 0.99% and Hang Sang down 0.71%.
The Dow should open moderately lower ahead of earnings season. Will the Minutes of September’s FOMC meeting impact trading? The 10-year is up 3/32 to yield 2.08%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.