Retrospective – past week
Quite a roller coaster, during earning season – started well with banks and Netflix, then Tesla disappointed, however the last day was quite a surprise:
While downtrend was confirmed by options market, bonds fundamentals and TA, half an hour before market open on Thursday – market surged violently higher.
Market manipulation?
Some sources claim this unexpected reversal was triggered by this WSJ post, which was enough to put back on the table the Pivot narrative, which we all thought was already buried last week.
The timing of this article was amazing, just when market started to sink before open and there was nothing to stop it while everyone was signaling capitulation is around the corner, options market’s puts were positioned – and much more important: no more FED zombies speeches were scheduled to deny this false hopium.
Did WSJ just bailed out their colleagues?
Moving on to next week
Earning season on calendar, this time with mega cap FAANG, Boeing, GM, Coca Cola, Chevron and more…
And if that’s not enough, the PCE (which is the indicator the FED is relying on, rather than CPI) is going to be published on Friday, just before the 1st & 2nd of November – FOMC meeting.
Cards on the table
Let’s check the opposite forces for this week and beyond:
Mid-term election – short term bullish.
Fake Pivot hopium – short term bullish.
Megacap earnings – considering most been already priced in, only surprises to meet expectations is a big unknown variable on this equation.
Energy – Saudi Arabia playing against the US and Biden populism risking the SPR is a huge cloud over the energy sector that can drive inflation (thus interest rates) higher, however this is not for immediate term. Midterm bearish.
FED – the latest sport of FED zombies pouring cold water over any false Pivot hopium narrative is probably going to resume in a Jackson Hall fashion and can be the next leg/capitulation event that many people expect these days, however it’s probably not gonna happen this week. Midterm bearish.
Inflation – unemployment rate is still on a generational bottom level (see here). The demand for workers still high, thus wages gonna continue climb. With energy and delivery costs still not going significantly high, and the risk of commodities continuous crises – that means companies will have to continue raising prices of their product & services. Midterm bearish.
FED Funds rate – all FED zombies were (too) clear about it, they’re not gonna stop raising interest rates till inflation is confirmed reaching 2%. We’re not getting close to this target. They have 125 bps to go by the end of this year, and energy market + geopolitical situation is not going to make things faster. If something is going to break first and they’re going to pivot – that’s a lose-lose situation cause capitulation will give you enough time to prepare and switch position. Midterm super bearish.
Strategy
Most short term fundamentals are bullish for this week, leaving the big enigma out of the equation – mega cap earning results.
Since those earnings can’t be predicted (at least by me…), then staying on the sidelines is still a good strategy. However –
If this hopium gonna be fueled with positive or at least non-negative earnings, the TA gonna reach some great short opportunity levels for the week afterwards –
Disclaimer
NFA first, I’m not a financial advisor, except from iOS programming I’m afraid I can’t provide professional assistance on anything officially.
Second – be open minded. June/October lows can be a quarter bottom, let’s not rule this out.
Third – be careful when shorting, there are a lot of professional algorithms to scare you out and rip off your stop losses.
Forth – there are lots of revenge traders out there, people & institutions lost fortunes during 2022; make sure you’re doing it properly, and from the correct reasons.