Every September the stock market continues its rally for 3 weeks before flipping and going on a massive sell-off in the last week of September. But with October through January historically being the best 4 months of the year for stocks, investors would be wise to buy the dip at the end of September. I explained how I plan to use options to maximize my profits in today’s video. Make sure to watch it here: https://www.youtube.com/watch?v=Nsk-9hIaWiw&list=UULFxFRGG-_23Kqxe0YexDc1eg.
Last Week Recap
Even though it felt like the rally continued last week, the markets were actually flat for the most part. While the DOW rose 1% to close at a new all-time high, the S&P 500 was mostly flat, finishing up just 0.28%. And the NASDAQ and Russell 2000 actually fell. Sadly, this means the NASDAQ continues to nearly perfectly track the 2007 – 2008 stock market. And if the historical correlation continues, the NASDAQ should drop a little this week.
The reason the markets were muted last week is because while some better than expected economic data helped boost the DOW, Nvidia’s mediocre earnings caused the NASDAQ to fall. We are continuing to see a slowdown in earnings growth across multiple sectors, which is hurting stocks – especially those that are the most overvalued such as the mega-cap tech stocks.
I posted an in-depth look at Nvidia’s earnings and discussed what it means for the future of Nvidia’s stock in Thursday’s video. You can watch it here if you missed it: https://www.youtube.com/watch?v=txScThsZxJU&list=UULFxFRGG-_23Kqxe0YexDc1eg.
Market Sentiment
The CNN Fear and Greed Index (https://www.cnn.com/markets/fear-and-greed) finally got back to Greed last week. It was helped in large part by options traders who finally moved out of Fear and into Neutral. The Fear and Greed Index is still quite mixed through, with Stock Price Strength in Fear, but Stock Price Breadth in Extreme Greed. It means most stocks are rising, but not so much as to make new all-time highs. In short, while the market is bullish, it’s not extremely bullish. And this means the current bull-run is weak, and susceptible to being undone. Bullish investors would be smart to place stop losses in case the bull-run fails to continue.
The VIX fell slightly last week, but still remains in Neutral territory. The VIX actually closed right at 15, which is the threshold between Neutral and Bullish. This week will be key in determining if the bull run that started 3 weeks ago can continue or not. Unfortunately the VIX just isn’t giving a strong indication either way.
Technical Analysis
The daily charts remain 100% bullish on all four major indices. This is a strong indication that the bull run will continue this week – at least through Wednesday. Thursday and Friday will be determined by the economic news, which I’ll discuss later. Not much more to say about the technicals. They are very bullish and are not showing signs of the market being over-bought, so that’s a good indication stocks will continue to rise this week.
The weekly technicals aren’t quite as bullish as the daily technicals. While the DOW is 100% bullish, it is getting very close to over-bought, and due for a little bit of a pull-back. It could continue to rise for a while longer before pulling back through.
The S&P 500 and NASDAQ are both mostly bullish, but still struggling to see green on the MACD. They are much weaker than the DOW, and the most likely to fall in the event of any concerning economic news. I would place the S&P 500 and NASDAQ closer to Neutral rather than bullish.
The Russell 2000 is also 100% bullish like the DOW, but without being close to over-bought. If there was one index I would bet would continue to go up, it would be the Russell 2000.
It should also be noted that all 4 indices formed a hammer candle last week, which is a reversal candle, and could indicate a pull-back this week. So while the daily charts are 100% bullish, the weekly charts are much more Neutral, and a red flag that this rally over the past three weeks is weak.
Economic News
While there are some minor economic reports on Tuesday and Wednesday that day traders might be able to take advantage of, the big market movers are going to be the jobs reports on Thursday and Friday. If those jobs reports come in worse than expected, it could trigger a sell-off just like we saw last month. Friday is the official jobs data, and this will have the biggest impact on the market. I would not be surprised to see a 1% or greater move in the markets on Friday.
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
Earnings season is winding down, but we still have some popular small cap stocks reporting. Tuesday after the close, Zscaler reports. Then Wednesday after the close we have C3.ai reporting. Then Thursday before the open we have Nio reporting. There are also some other stocks popular with retail investors that you might want to know about, so make sure to study the chart below.
Crypto
Crypto continued to struggle last week. It continues to look bearish for the next few weeks, and possibly months. Bitcoin fell below my stop-loss of $57,500. While the candle bodies continue to trade within the same $57,500 – $69,000 range that they’ve been in since March, quite a few wicks have fallen well below this range. This means crypto is looking really bearish. At this point, it looks like we’re just waiting for a catalyst to send us lower. So far Bitcoin hasn’t dropped below $48,500 since February, but if it were to fall that low again, that would be where I’d be looking to buy the dip.
Other Things to Know
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Wishing you the best of success trading this week,
Stock Curry