The Markets End The Week In Good Shape (Technically Speaking For The Week Of 10/5-10/9)
My Friday column is divided into two sections. The first uses the long-leading, leading, and coincidental format developed by Arthur Burns and Geoffrey Moore to determine the current economic trajectory. The second looks at the markets.
Long-Leading Indicators
Financially, the economy is in good shape:
The Fed has been pumping cash into the economy (left). The Fed’s credit market support programs have lowered financial stress; the BBB yield (right) has dropped to 5-year lows.
The earnings picture is improving — but remember that word is clearly relative (emphasis added):
The expectation is for total S&P 500 earnings to decline -22.8% from the same period last year on -2.9% lower revenues. This would follow the -32.3% decline in Q2 when economic and business activities came to a halt as a result of the pandemic-driven lockdowns.
The earnings outlook has been steadily improving since the start of Q3, as economic and business
My Friday column is divided into two sections. The first uses the long-leading, leading, and coincidental indicator method developed by Arthur Burns and Geoffrey Moore. The second looks at the large equity index ETFs.
The yield on all manner of credit rose sharply at the beginning of the recession. But all are now lower. AAA (upper left) and BBB (upper right) are now near 5-year lows. CCC (lower left) rose to just shy of 20% but are now back to the 12.5% level.
The shorter-end of the corporate yield curve (1-10 year yields; left) and longer-end (10+ years; right) all spiked at the beginning of 
The ADP jobs report was strong (emphasis added):
The best news is that growth is spread over a number of industries.
This bodes well for Friday’s jobs report.
Let’s start where we usually do on Mondays: last week’s fund flows from ETF.com:
The SPY had a huge outflow of $6.8 billion, more than reversing the inflows from the last two weeks. The IWM (Russell 2000) also lost a large amount of cash. But traders are buying the QQQ’s dip. Finally, there was a large move into the long-bond — a clear safety play.
Tech was the big loser, losing $1.35 billion last week. It’s brethren communication services was more fortunate, only seeing a $145 billion outflow. Financials are also losing money. Investors are probably seeing a very poor 3Q20 on the horizon for the banking industry and acting accordingly. Interestingly, consumer staples and health care (two defensive sectors) also had a net outflow. Only four sectors saw inflows. Overall, this is a bearish table.