Risks are ensuing the markets… and they could spread like wildfire, catching traders off guard… until it’s too late and all they could smell is fiery smoke.
The White House has shifted its attack plan again China in the ongoing dog fight of a trade war… and Trump may finally have the upper hand.
In a stunning turn of events, the Trump administration noted they were discussing ways to limit flows into China, which would affect major funds.
This is going on all while the two countries have plans to negotiate a potential truce in the trade war… but the U.S. also acted in retaliation, as China removed some limits on foreign investments.
With the quarter coming to a close tomorrow, we could see some wild swings in the market… and that means more opportunities for us to make money.
The big question now: Does the market just rocket through all-time highs, or do stocks pull the ol’ fake out break out and take a dive?
In this week’s edition of The Jump, I’ll be focused on the macro view, charts and catalysts… and the upcoming earnings and IPO calendar. That way, I get an aerial view of the market and can formulate my attack plan.
With the fourth quarter starting soon, now’s the time to analyze overall market conditions so you don’t randomly get into trades… and step on a land mind.
One of the easiest ways to get a bird’s eye view of the market and what’s to come is to look at the extreme ends.
In other words, what the safe-haven assets are doing in relation to stocks.
Note: Risk off = bad for stocks
When people fear equities, they pile into bonds. Bonds tend to provide more safety due to lower risk. But, they have lower returns.
All year, we’ve seen Treasury yields get destroyed… which caused bond prices to skyrocket, as you can see in the weekly chart below.
Do traders still want bonds?
However, we’ve seen a big pullback recently… followed by some choppy price action after some comments from China and Trump.
Over the short-term, things still look a bit muddled.
If you look at the hourly chart in TLT above, you’ll notice it’s trading around a key level — the 200-hourly simple moving average (SMA). This is going to be crucial and will give us an idea as to where TLT can head.
Gold prices signaling risk-off
Gold also acts as a flight to safety. Investors tend to lean on gold when they fear inflation in the dollar… and often times, you’ll see gold prices spike up when there’s political turmoil, economic uncertainty, or any other risks on the table.
With potential contagion risk…
The weekly gold chart still looks very bullish.
GLD says risk-off over the long term, but maybe a touch of risk near-term…
GLD tried breaking below a key level at $140… but no cigar, and it could be ripe for a rebound to multi-year highs very soon.
The flip side of gold is the dollar. When the dollar increases any item priced in dollars should decrease. This includes houses, stocks, gold, oil, etc. So it’s really strange to have the dollar so strong here.
Both the weekly chart in the dollar shows about as strong a bull trend as exists.
Even on the short-term chart, UUP is strong… as we saw the money pattern flash a buy last week, and now it’s at break out levels.
UUP says risk is definitely off no matter the time frame
The Risk On Trades
Naturally, the risk-on trades revolve around stocks. Small caps have a higher risk than large caps… and tech stocks are among the riskiest, especially right now.
So what’s going on with the “overall” market
The SPDR S&P 500 ETF (SPY) lost a lot of upside momentum… and it reminds me a lot of the top we made back in 2015. We’re sort of rounding out here.
New highs aren’t out of the question…
… sure we’ve continued to make higher highs. But, it’s tough to see stocks continue to run higher with no massive pullbacks, like the one we saw last October into the year-end.
Of course, over the long-term SPY looks strong… but the hourly chart paints a different picture.
SPY is sitting right around its 200-hourly SMA, and if it breaks below… we could see a quick plummet.
The QQQ look at lot like the SPY on the weekly chart… but on the hourly chart, we’re seeing some bearish price action.
However, neither is anywhere close to breaking the bull trend. One difference I do see is we didn’t make higher highs in tech stocks.
Following the failed break above all-time highs… QQQ pulled back below a key level on the short-term chart.
QQQ is below its 200-hourly SMA (the green line in the chart above)… and we could see a quick move back down to the $180 level.
Another ETF to keep an eye on is the iShares Russell 2000 ETF (IWM) — the small-cap ETF.
The IWM tends to lead the beginning stages of bull markets. Right now, I see a lot of sideways in the weekly chart. One thing I do know. If we close weekly above or below the blue horizontal lines, price will start moving in that direction with some force.
IWM says it can’t decide where it wants to go on the long-term chart… but on the hourly chart, it’s decidedly bearish.
We saw the money pattern (blue line cross below the red line) and IWM get right to the green line… and it could head lower from these levels.
Right now, the best thing to do is to remain patient and assess the overall situation.
That said, let’s take a look at what’s on the docket for economic catalysts.
Monday, September 30
- 9:45 AM EST Chicago PMI for September
- 10:30 AM EST Dallas Fed Manufacturing for September
Tuesday, October 1
- 3:15 AM EST Fed’s Evans speaks in Frankfurt, Germany
- 7:45 AM EST ICSC Weekly Retail Sales
- 8:55 AM EST Johnson/Redbook Weekly Sales
- 9:30 AM EST Fed’s Bowman speaks at Community Banking Conference
- 9:45 AM EST Markit US Manufacturing PMI, Sept-F
- 10:00 AM EST ISM Manufacturing for Sept
- 10:00 AM EST Construction Spending MoM for August
- 4:30 PM EST API Weekly Inventory Data
Wednesday, October 2
- 7:00 AM EST MBA Mortgage Applications Data
- 8:00 AM EST Fed’s Barkin speaks at conference
- 8:15 AM EST ADP Employment Change for September
- 9:00 AM EST Fed’s Harker speaks at Community Banking Conference
- 10:30 AM EST Weekly DOE Inventory Data
- 10:50 AM EST Fed’ Williams speaks in San Diego
Thursday, October 3
- 2:45 AM EST Fed’s Evans at Central Banking Conference in Madrid
- 8:30 AM EST Weekly Jobless Claims
- 8:30 AM EST Continuing Claims
- 9:45 AM EST Markit US Services PMI, Sept-F
- 9:45 AM EST Markit US Composite PMI, Sept-F
- 10:00 AM EST Factory Orders for August
- 10:00 AM EST Durable Goods Orders, Aug-F
- 10:00 AM EST ISM Non-Manufacturing Index for September
- 10:30 AM EST Weekly EIA Natural Gas Inventory Data
- 12:10 PM EST Fed’s Mester speaks on inflation
Friday, October 4
- 8:30 AM EST Change in Nonfarm Payrolls for Sept
- 8:30 AM EST Change in Private Payrolls for Sept
- 8:30 AM EST Change in Manufacturing Payrolls for Sept
- 8:30 AM EST Unemployment Rate for Sept
- 8:30 AM EST Average Hourly Earnings for Sept
- 8:30 AM EST Trade Balance for August
- 8:30 AM EST Fed’s Rosengren speaks at Boston Fed Conference
- 10:25 AM EST Fed’s Bostic speaks at Tulane University
- 1:00 PM EST Baker Hughes Weekly Rig Count
IPOs have been acting a bit wacky, but that doesn’t mean there aren’t still opportunities to make money… here’s a look at some companies set to go public this week.
- ADC Therapeutics (ADCT) 8.164M share IPO expected to price between $23-$26 per share
- Aprea Therapeutics (APRE) 5M share IPO expected to price between $14-$16 per share
- Frequency Therapeutics (FREQ) 6.7M share IPO expected to price between $14-$16 per share
- Viela Bio, Inc. (VIE) 7.5M share IPO expected to price between $19-$21 per share
Now, we’ve got a relatively light earnings calendar this week… but some names I’m wathcing include:
- Stitch Fix (SFIX) expected on Oct. 1, implying 21.37% move, the historical average move is 19.4%.
- Ford (F) expected on Oct. 2, implying 3.41% move, the historical average move is 4.91%.
- Bed Bath and Beyond (BBBY) expected on Oct. 2, implying 16.18% move, the historical average move is 12.68%.
- Pepsi Co. (PEP) expected on Oct. 3, implying 2.76% move, the historical average move is 2.03%.
- Constellation Brands (STZ) expected on Oct. 3, implying 5.58% move, the historical average move is 5.2%.
- Costco (COST) expected on Oct. 3, implying 4.61% move, the historical average move is 3.84%.
The fourth quarter starts in two days… and if you haven’t done so already… make sure you have the right strategies in place so you can attack the market from any direction.