The weekly stock market update is back! After a year off, I’m bringing back the weekly stock market update. I missed writing this for you as much as you’ve missed reading it. If you’re interested in what’s been going on for the past year and the reason why I took a year off from writing this newsletter, you can watch this video here on my new Faith Roar YouTube channel: https://www.youtube.com/watch?v=bpULiZpo_rM. Otherwise, read on to read my analysis of the stock market and my prediction on how the stock market will perform this week.
Market Recap
The stock market reached another new all time high last week before pulling back a little on Thursday and Friday. The new stock market highs come amid major economic and fundamental setbacks, including the government shutdown and valuations at the highest level since the dot-com bubble.
There’s no doubt we’re in a bubble. But with the stock market this bullish, it would be foolish to try and short the stock market. But that doesn’t necessarily mean to buy stocks either. Bubbles tend to burst suddenly, when nobody expects them to. And often, the reason why a bubble bursts is unknown. The secret to making money in a stock market bubble is to make short-term trades, and avoid long term investments.
Personally, I have been selling all of my long term investments. After all, the way to make money in the stock market is to buy low and sell high. And right now, with stock valuations at the highest levels since the dot-com bubble, this is clearly a sell high period of time. That’s why Berkshire Hathaway’s cash balance is the highest in history. They sold high, and now they’re waiting for a stock market crash to buy back in.
But we don’t have to sit idly by and wait on cash for a crash. We can trade stocks in the short term. And as long as the stock market remains as bullish as it is, we should be looking for opportunities to buy stocks that are hyped up. That’s why I’ve been focusing on retail heavy stocks and short squeezes. This market cycle is all about buying the hype. Just make sure to keep your trades short. You want to buy low and sell high, not buy low and bag hold.
I’m alerting my trades in the Stock Dads discord (more details on how to get my trade alerts and how to join Stock Dads are at the end of this newsletter).
Market Sentiment
The market is… fearful??? Yes, the CNN Fear and Greed Index (https://www.cnn.com/markets/fear-and-greed) is showing Fear. This has confused a lot of people, considering how the stock market continues to reach new all time highs each week. What most people forget is that the Fear and Greed Index is made up of 7 factors, and the S&P 500’s rise is just 1 of those 7 factors. The Stock Market Momentum portion of the Fear and Greed index remains in the Greed stage. It’s the other 6 factors that go into the Fear and Greed index that are ranging between Neutral and Extreme Fear, causing the overall Fear and Greed index to read Fear.
Stock Price Breadth is in Extreme Fear. This means that only a few stocks are rising massively, while most stocks are falling. Stock Price Strength is also in Fear, meaning fewer and fewer stocks are hitting new 52 week highs, again pointing to only a few stocks rallying, which in turn is propping up the overall stock market.
Once you understand that the S&P 500 is weighted, with only 10 stocks making up 50% of the index, and the remaining 490 stocks making up the other 50%, you can see how if those 10 stocks rise, and most of the remaining 490 stocks fall, the overall S&P 500 index will go up, even if 480 of the 500 stocks are falling. And that is what’s been happing. The 10 largest stocks, which make up 50% of the index, are rising, while most of the other stocks are falling. And that’s what’s causing the S&P 500 to rise and reach new all time highs, while the Fear and Greed Index remains in Fear.
Understanding that only a few stocks are rising should reinforce the importance of being a stock picker right now in this environment. You want to be buying and trading the 20 most popular stocks, and ignoring the remaining 10,000+ stocks in the stock market which are falling. Once the bubble bursts, look for the Fear and Greed Index to rise while the S&P 500 falls, and this will be your indicator that it’s time to start buying undervalued stocks that have long been forgotten… mainly consumer staples and small caps.
The VIX also remains elevated at 17.44. This is somewhat neutral, but borderline bearish. It’s a clear indicator that while the stock market continues to rise, options traders continue to buy insurance against a stock market crash with put options. Options traders are acting cautiously bullish, meaning they are buying stocks as the market continues to rise, while also well aware that we are in a bubble and buying put options to protect against the eventual crash, which nobody knows when will start.
Technical Analysis
Technical analysis shows a slowing down in the bullish momentum. The weekly chart is overbought, with the RSI above 70. We see the slowdown in the MACD with a continued fall towards bearishness, although still remaining bullish for now. Most notably though is the fact that the weekly chart formed a doji candle last week. Doji candles are reversal candles. Looking back through history, the S&P 500 has rarely fallen long term after a doji candle, but has fallen the following week. Based upon the 10 week EMA, I would expect the S&P 500 to fall 3% next week to 661 before bottoming out and continuing the bull market run. This would mark a 4% fall from all-time highs, not enough to put us into correction territory. Still, given how many are fearful of a burst in the bubble, expect to see many calls for “this is the top” and “the crash is starting” next week. I do believe those calls will be short lived however, as the market should recover and reach new all time highs in 2 weeks, after the short 3% pull-back is over.
The daily chart is also mildly bullish. But when we look at the 1 hour and 4 hour charts, they are both bearish. This indicates a continued fall in the stock market early next week. I do believe the market will fall 3% between Monday and Wednesday before bottoming out and rising Thursday and Friday. Of course there are no guarantees that will happen, but that’s how it should play out if history repeats itself.
Economic News
There’s almost no official economic news coming out with the government still shut down, so we’ll continue to rely upon private data, the most important of which will be the ADP Private Payroll data on Wednesday. This will be the closest thing we get to actual jobs numbers.
Most importantly, we have Fed speakers on Thursday and Friday. The market fell last week after Jerome Powell indicated the Fed might not cut rates in December as the market had been pricing in. This week’s Fed speakers could allow hope of a December rate cut to re-enter the market, which could help the market recover last week’s post-Fed meeting losses.
No news on Monday and Tuesday might allow the market to continue falling before news Wednesday through Friday causes the market to recover.
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
Major companies continue to report earnings this week. Be careful, because some large cap stocks have fallen by more than 20% post-earnings, with many falling by more than 10%. It seems like more companies are falling rather than rising post earnings this season, even after beating earnings. So be careful with your stocks this week, and set stop losses in case of a fall.
Some of the more notable companies reporting this week include Palatir and Hims & Hers on Monday after the close, Uber and Shopify before the open on Tuesday, AMD and Supermicro after the close on Tuesday, Robinhood after the close on Wednesday, and The Trade Desk and Opendoor after the close on Thrusday.
Crypto
WARNING! Crypto is about to form a death cross on the monthly chart. The last time this happened, Bitcoin fell over 60% in 8 months (from 69,000 to 17,500). It eventually recovered, but many crypto traders were wiped out when some alt-coins fell by over 90%. So regardless of what the stock market does, crypto traders need to be ready for another crypto winter. It looks like winter could start in November, just in time for an actual winter in the northern hemisphere.
Other Things to Know
As a THANK YOU for patiently waiting (for over a year) for another newsletter to be sent out (and for reading this far in the newsletter), I am giving you 2 months free to my Stock Dads discord. This is where I post all of my trade alerts, as well as 30 other full-time, multi-millionaire, traders posting their trade alerts. This offer is only available to newsletter readers, so please do not share this link with anyone! To claim your 2 free months to the Stock Dads discord, use this link here (details of how the offer works are on this page): https://whop.com/checkout/plan_4ismigWikagva?d2c=true&a=stockcurry. Over 7,000 people have joined Stock Dads and are renewing their membership every month. Why? Because traders like Amar just turned $1,000 into $10,000 over the past few months, with every single trade alerted live as the trades were placed. Stock Dads members also got all of my trade alerts in March when I turned $1,000 into $32,000. And because we alert our trades live as we make them, this gives you an opportunity to follow along. And since this is your ONLY opportunity to get a discount, take advantage of this thank you for waiting so patiently for the newsletter. We never run promotions. This is just a one-time offer as a thank you for being so patient, and remaining a newsletter subscriber.
I’ve also started a new YouTube channel called Faith Roar. If you’re interested in starting your own business or even starting your own YouTube channel, Faith Roar is for you. This is where I post about my personal life, and help people just like you start their own businesses and YouTube channels. It’s completely free, so come subscribe and watch the videos. Links to the YouTube and Rumble channels are at https://faithroar.com
Multiple trading platforms continue to offer free stocks and high yields on cash. So get your free stocks while you still can at https://weprofit.io/platforms/.
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Wishing you the best of success trading this week,
Stock Curry