The last two jobs reports sent the market down 2% in August and down 4% in September. Now the next jobs report is coming out, and it’s not good. Expectations are for the same numbers that sent the market down 4% in the first week of September. But just like in August and September, the market could recover over the following 3 weeks. After all, we just had the first green September in 5 years, and that shows just how bullish the stock market remains.
With the market remaining bullish, now might be a great time to buy the dip on some lesser-known AI stocks. Here are 5 AI chip stocks that could outperform Nvidia over the next 2 years: https://www.youtube.com/watch?v=_scwu8z5lkU
Last Week Recap
With the stock market up mildly last week, it locked in the first green September in 5 years. The last time the market was green in September, the market rallied an addition 5% during the last 3 months of the year. So long as the majority of the economic news continues to come out better than expected, we could see the same thing happen again this year. But with the labor market cooling fast, any fears of an upcoming recession could trigger a prolonged market sell-off.
There wasn’t anything super interesting that caused the market to go up last week. Rather, it was the lack of bad news that kept the market from falling. Congress approved the appropriations bill needed to prevent a government shutdown, PMI services and manufacturing data came in better than expected (although still showing a decline), and the PCE inflation data came in lower than expected (giving investors hope of a soft landing). Without a catalyst to bring the market down, the market just traded flat.
The market was also boosted by Federal Reserve members speaking. Many long time hawkish Fed members turned dovish, giving their reasons why rate cuts are now warranted. This reinvigorated hopes that the Fed would do 5 rate cuts this year, rather than the 4 they predicted. With more Federal Reserve members speaking this week, we could see further bullishness in the markets.
Market Sentiment
With the stock market trading flat last week, it’s not surprising that the CNN Fear and Greed Index (https://www.cnn.com/markets/fear-and-greed) remained flat as well, closing in the Greed stage once again. Most notably, options traders are now bullish after remaining bearish for the past few months. Bond traders are still bearish though.
The shocker though is the VIX. Despite the slight increase in the market last week, the VIX actually rose 10%. It appears S&P 500 options traders are still worried about an upcoming drop in the market. The VIX closed the week at 16.96, which leaves it in Neutral territory. So options traders aren’t totally bearish yet, but they aren’t exactly bullish either.
Technical Analysis
It shouldn’t come as any surprise that the markets are still 100% bullish. Both the DOW and S&P 500 even hit new all-time highs last week. There are some very mild indicators that the bullish steam might be slowing down, just based upon the rolling downward shape of the candles, which appear to show a top and flattening out of the recent rally.
Overall though, even though we might get a slight pull-back on Monday or Tuesday, the markets look poised to continue their recent rally. Wednesday’s and Friday’s jobs reports could derail that though, so make sure to read through the Economic News section of this newsletter thoroughly.
The weekly charts remain nearly 100% bullish, with only the NASDAQ MACD remaining slightly bearish. The NASDAQ is approaching resistance, which could hinder the market going higher temporarily. Both the DOW and S&P 500 just broke through that same resistance level though, so I don’t think the NASDAQ will have any issue breaking through and going higher. It’s just a matter of how long it’ll take for that to happen.
The weekly charts on both the DOW and S&P 500 appear very bullish, and both might be due for a sight pull-back down to the 10 day EMAs. For that to happen, both the DOW and S&P 500 would need to fall about 3%. After a slight pull-back, they could continue higher. This week’s jobs data could be just the catalyst the DOW and S&P 500 need to have that slight pull-back.
Economic News
Watch out for the September jobs data being released this week. The last two times jobs data was released, the market went down 2% and 4%. And with expectations that September’s jobs data will be just as bad as August’s, the market could fall another 3% to 4% this week. The official jobs data is being released Friday at 8:30am, one hour before the market opens.
In addition to the jobs data, we also have a lot of Federal Reserve members speaking this week .Last week, Federal Reserve member’s comments helped prop the market up. We’ll see if the Fed’s comments can do the same this week.
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
There’s only one major company reporting earnings this week that you need to know about, and that is Nike. Nike reports earnings Tuesday after the close. In the past, Nike has had a significant impact on the DOW, and to a lesser extent the S&P 500. Also watch out for Levi’s reporting Wednesday after the close.
Crypto
Bitcoin remains bullish for now. The rally is slowing down though, and Bitcoin has yet to break above the strong $69,000 resistance level. At this point, I would call Bitcoin a hold. I would upgrade Bitcoin to a buy if breaks $70,000, and I would label it a sell if it drops back down below $58,000.
Other Things to Know
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Wishing you the best of success trading this week,
Stock Curry