This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

The first day of October, also the first day of the fourth quarter, featured a face plant for stocks as increased tensions in the Middle East as well as the start of the expected port strike on the East and West coasts were too much for the charging bull to overcome. The two areas that (of course) benefited were crude oil prices/energy stocks and defense/aerospace stocks. WTI ended the session with a 3.4% pop and closing at $70.47/barrel, although that was well off the intraday high up near $72/barrel. Industries that import goods from overseas (retailers, toys, clothing, etc.) fell only 1% on hopes that the port strike won't last long, but we all remember what happened to prices during and after the COVID-19 pandemic. Information Technology was weak on Tuesday, led by renewable energy equipment (especially by weakness in solar), semiconductors, and computer hardware, all losing between 3% and 3.5%. These industries also import a lot of products and are very susceptible to supply disruptions. The S&P 500 (SPX), S&P 100 (OEX), Nasdaq, Nasdaq 100 (QQQ), and S&P 400 (MDY) gave up 0.9% to 1.5%, but all held near-term support. The SPX, OEX, and MDY closed on their 10-day exponential moving averages (EMA), while the Nasdaq and the QQQ bounced off their 21-day EMAs. So there is no short-term technical damage yet. We would be a bit concerned if the SPX dropped below its breakout area between 5,650 and 5,670, as that would create a false breakout. But for now, that wouldn't be an absolute game changer for stocks as there is so much potential support below current prices. We also have seen very strong breadth, which is not typical of a major top. (Mark Arbeter, CMT)

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

We have just two words for Wednesday's price action: Hammer Time! A hammer in candle-stick terms is a daily, weekly, monthly, etc., move that resembles a hammer. This pattern occurs when a security trades significantly lower than its opening, but rallies within the period to close above the opening price. Hammer candlesticks typically occur after a price decline and have a small real body and a long shadow, or wick. These can be seen anywhere within the overall market and indicate a potential price reversal to the upside. So now we need follow-through for confirmation that the trend has turned. The hammers on Wednesday also take on more significance because many of them were intraday tests of the recent lows from September 6. The S&P 500 closed up 1.1%, the S&P 100 tacked on 1.4%, and the Nasdaq and Nasdaq 100 both popped by 2.2%. Information Technology was the clear leader, with the XLK surging over 3%. Renewable energy equipment soared 15%, led by big gains in GEV, FSLR, VWDRY, and ENPH. Semiconductors were second, surging 5% and led by NVDA, TSM, AVGO, ASML, and AMD. The S&P 500 (SPX) and S&P 100 (OEX) regained their 50-day averages after losing them last week. The "500" appears to be tracing out a bullish continuous inverse head-and-shoulders pattern, which would be confirmed by a close above 5,660, as would a "V" bottom with a handle. The index completed a smaller bullish ABC reversal on Wednesday. A measured move based on the completed ABC reversal targets the 6,000 to 6,500 area. This area would also be a target based on the "V" bottom. (Mark Arbeter, CMT)