Tesla earnings, Netflix earnings, and over a dozen Federal Reserve speakers will really move the stock market this week, as well as some very important economic data.
Last Week Recap
Despite fears over the Israel-Hamas war causing uncertainty and oil prices to rise, the DOW rose for the first time in 4 weeks, and the S&P rose for the second week in a row. Small caps lagged though, with the Russell 2000 finishing near a 52 week low. Despite the rise in oil prices, a sharp buying of bonds sent bond yields crashing, which in turn boosted the stock market.
And earnings season kicked off with the banks reporting on Friday. Bank earnings were stellar with banks such as JPMorgan reporting a 35% increase in earnings. But any rally in the banking sector was muted due to banks warning that trouble was coming, including more layoffs for Wells Fargo, and fears that the world has a 50% chance of entering a 3rd world war should the conflict in the middle east escalate.
Market Sentiment
Market sentiment remains fearful, with the Fear and Greed index (https://www.cnn.com/markets/fear-and-greed) finishing in the Fear category for the 3rd week in a row (although it did temporarily drop all the way down to Extreme Fear last week).
Even the volatility index (VIX) has continued to rise, with the index closing up over 10% last week to close at 19.32 – the highest close since March. That puts the VIX in the neutral stage, and very close to bearishness. The VIX did rise above 20 (bearish) for each of the past two weeks, but has failed to close above 20 on the weekly chart so far.
Technical Analysis
All four major indices are bearish on the daily charts, coming in line with market sentiment. The Russell 2000 is the worst, having closed deep in bearish territory, and right at the critical 300 day EMA. The Russell 2000 has not dropped below the 300 day EMA since 2020, and prior to that in 2008. So there is a strong indication that the Russell 2000 may have bottomed here and may be ready to go on a rally. Should the Russell 2000 rally, the rest of the stock market should rally also. However, should the Russell 2000 continue to fall, and especially if it should close below the 300 day EMA on the weekly chart – that would indicate a major stock market crash is about to happen. So this week the Russell 2000 will be the major index to keep your eye on, as it could set the direction for the entire stock market for the rest of this year.
The weekly charts are still bullish for every index except the Russell 2000. The weekly charts haven’t been bearish since last year, as this year’s rally has continued despite a few setbacks in March and September. This week could trade fairly flat as the market struggles to pick a direction. The market could even drop a little bit, and still keep the weekly charts bullish for the most part. So unless we get a major rally or major sell-off this week, the weekly charts probably won’t be much help until November.
Economic News
There are a lot of economic reports being released this week, but nothing major enough to really move the market. The big news this week will really be the Federal Reserve speakers. There are over a dozen Fed speakers this week, with Fed members speaking every day this week. With the markets still uncertain about what the Federal Reserve will do at their meeting next month, this week could really give some clarity to the Federal Reserve’s next move. Should that clarity come, it could cause a pretty significant rally or sell-off depending upon what the consensus is. So keep your eyes out for any news about what the Fed speakers say 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
Earning season is in full swing. This week will be inundated with bank earnings. But the two earnings everyone will really have their eyes on are Tesla and Netflix. I gave my analysis on Tesla earnings and how I think the stock will perform in this video here: https://www.youtube.com/watch?v=sJ2_9z3ByfA&list=UULFxFRGG-_23Kqxe0YexDc1eg
Other Things to Know
I will be in New Orleans this week meeting with thousands of other finance content creators. If you’d like to meet me, I’ll be hosting a meet and greet on Friday. Here are the details:
Friday, October 20 at 6:30pm
Backspace Bar & Kitchen
139 Chartres St, New Orleans, LA
New Course!
I launched a new course for beginner traders to teach you how to trade options, how to read charts, and how to perform technical analysis and fundamental analysis. Check it out at https://weprofit.io/courses.
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Wishing you the best of success trading this week,
Stock Curry