Stock Market Prep – All Time Highs This Week

The stock market is on track to hit new all time highs this week. But watch out for a storm brewing. Not only are the delayed October jobs numbers being released on Tuesday, the FOMC meeting is also on Wednesday. CME futures are predicting an 88% chance of a Fed rate cut. But Tuesday’s jobs data could change that. Usually the market is fairly certain what the Federal Reserve is going to do, but this time, because of the delayed government data, we’re not so sure. And that could cause some major volatility in the markets this week, including the possibility for a massive sell-off on Wednesday and Tuesday if the Fed does not cut rates.

Market Recap

As predicted in last week’s newsletter, the market finished mostly flat, with the DOW up 0.6%, the S&P up 0.3%, the NASDAQ up 1%, and the Russell 2000 up 0.8%.That was actually more bullish that I expected, and almost guarantees another flat week this week, if not somewhat down. But I still expect us to reach new all time highs by the end of the this month. So if we do finish this week somewhat in the red, I wouldn’t be too concerned. We seem to be in a bit of a consolidation period right now, so I would expect stocks to trade mostly flat for the next few weeks.

But historical analysis could get disrupted this week by the Federal Reserve. I understand there’s some confusion around why a bad economy would actually be good for stocks. I was confused too, until I figured out that news is neutral, and that a bull market like we’re in now is going to find any reason to buy. In this case, a bad economy means the Federal Reserve will cut rates, which in turn should be good for stocks as the cost of borrowing goes down, which in turn spurs spending and therefore revenue increases.

Crypto also flattened out last week, with Bitcoin down just 1.4% and Ethereum up 1.6%. I still remain long term bearish on Bitcoin though, and reiterate my $55,000 price target.

Market Sentiment

Thanks to the rally over the past two weeks, the CNN Fear and Greed Index (https://www.cnn.com/markets/fear-and-greed) has risen from Extreme Fear to just Fear. Most interesting, one of the 7 factors is actually in Greed, and that is Safe Haven Demand. That means money is flowing out of bonds and into stocks. While some might see this as an early indicator that market sentiment is turning bullish again, I’m more inclined to think this has more to do with the FOMC meeting on Wednesday, and bond trades becoming cautious.

Confirming the market becoming less fearful is the Volatility Index (VIX). The VIX fell again last week, and is now nearing 15, which has been fairly close to a bottom for the VIX for the past 12 months. While not exactly bullish, it’s close, as any number under 15 is bullish. This is a good sign that the market will in fact reach a new all time high by the end of this month. Overall, we may not see a massive rally, but we should see a slow increase up to all time highs

Technical Analysis

The daily charts are showing 100% bullishness on all 4 major indices. I’m convinced the market will continue rising, but slowly. We still need a little more consolidation before rallying again. Unfortunately with the FOMC meeting this week, technical analysis won’t mean much. So just keep your eyes on the FOMC meeting, because that’s all that matters this week.

There’s not much change on the weekly charts. It’s almost 100% identical to last week. Mostly bullish and just slightly bearish, but really more neutral than anything else. It looks like the market is mostly just waiting to see what happens with FOMC on Wednesday.

Economic News

There are two major pieces of economic data this week. The first is the delayed October jobs data being released on Tuesday, and the other is the FOMC meeting on Wednesday. Tuesday’s jobs data could impact the Fed’s decision on Wednesday, and right now, nobody is really sure what the Fed is going to do. So be careful trading this week. I know a lot of traders who will be sitting Wednesday out just to be safe.

Here’s the full list of all of the economic news coming out this week as well as the time each report is being released: https://www.marketwatch.com/economy-politics/calendar

Here’s what time each Fed member is speaking this week: https://www.federalreserve.gov/newsevents/calendar.htm

Earnings

While no companies are reporting earnings this week with enough weight to move the markets, there are still quite a few companies reporting this week that you might be interested in following. I had already mentioned Adobe in my video last Monday, and they report Wednesday after the bell. In addition, we have GameStop on Tuesday, Oracle on Wednesday, and a few other smaller companies on Thursday.

Crypto

Crypto flattened out last week, but still remains down significantly from highs. Rather than bottoming out and turning bullish, crypto appears to be consolidating and taking a break from the very fast sell-off last month. It does look like the sell-off will continue after some time of consolidation. I reiterate my $55,000 price target on Bitcoin.

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