EB Weekly Market Report – Monday, November 20, 2023 | Buying and selling Locations with Tom Bowley

Pattern Report

Under is our newest Weekly Market Report (WMR), which is printed on Sunday/Monday of each buying and selling week. It is not like our Each day Market Report (DMR) because the WMR focuses nearly completely on the Massive Image and is extra designed for these with longer-term investing/buying and selling horizons. Our DMR seems far more intently at present motion, designed extra for energetic merchants.

I thank all of you which have adopted my work right here at StockCharts.com over the previous 16 years and this pattern report is only a small Thank You on your assist! In case you just like the report beneath and wish to subscribe to our full service, we do supply a 30-day FREE trial and signing up now makes a whole lot of sense. Our Fall Particular, which presents the best possible value for our service, begins tomorrow and can final roughly via the tip of November. In case you take us up on our Trial Supply and revel in our service, you’ll be able to then subscribe utilizing our BEST DEAL of the yr.

Both means, ENJOY and Completely satisfied Thanksgiving!

Weekly Market Recap

Main Indices

We lastly noticed some relative power out of small caps (IWM) and mid caps (MDY) final week. All of our main indices gained floor, however the IWM almost tripled the NASDAQ 100 and easily acted far more bullishly after the tame October CPI report was launched on Tuesday morning earlier than the opening bell. That triggered a tsunami of shopping for on Tuesday. After a quick pullback, the small cap bulls had been again out on Friday. I might deal with the IWM as an uptrending ETF – till confirmed in any other case. Take a look at the chart, with two key assist ranges recognized:

There’s nonetheless a lot work to do, however the IWM is at the least starting to point out vital enchancment, particularly on absolutely the value chart. The massive hole up on Tuesday now gives us glorious hole assist at 174.23 and the rising 20-day EMA is at present at 172.17. These are the 2 assist ranges to observe intently.

Sectors

Two sectors that had actually struggled in 2023 as a consequence of increased rates of interest had been actual property (XLRE) and utilities (XLU). It made sense for these two to carry out nicely when buyers poured into bonds final week, sending the 10-year treasury yield ($TNX) plummeting. Shopper discretionary (XLY) had a superb week as nicely. You may see beneath that 4 of the highest 6 trade teams final week had been within the client discretionary sector.

I usually outline a day by day uptrend as “value above the 20-day EMA and the 20-day EMA above the 50-day SMA”. Of our 11 sectors, XLB is on the verge of assembly this definition because it prepares for a golden cross (20-day EMA crossing above 50-day SMA). The one different two sectors not assembly this definition and nonetheless exhibiting extra work left on their charts are vitality (XLE) and well being care (XLV). Listed here are the 2 charts:

XLE:

The XLE printed a tail beneath current value assist on Thursday, then recovered to check its nemesis, the 20-day EMA. At present, the XLE is caught between these two – value assist close to 82.50 and the 20-day EMA at 85.26. Let’s have a look at which one breaks first. In a bull market, I give the sting to the XLE breaking again above the 20-day EMA.

XLV:

The XLV appears to be a bit additional alongside in its restoration try. It at present resides proper at key value and trendline resistance. A breakout can be a strong piece of technical proof that the “correction backside” is in for the XLV.

Prime 10 Industries Final Week

Renewable vitality ($DWCREE) jumped about 13% on Tuesday alone after the October CPI report was launched. The 290-300 space has confirmed to be tough short-term resistance, so let’s examine if the group can energy via that space this week:

In that resistance zone is hole resistance and a number of value makes an attempt at a breakout, so clearing it will positively enhance the technical image right here, maybe even switching the general development from downtrend to uptrend. Earlier than you get too excited, nevertheless, please remember that renewables have been lagging badly vs. the benchmark S&P 500. We have seen some enchancment, however there’s little management. In different phrases, a lot of the present rebound may be attributed to very oversold circumstances and a bounce, plus a really sturdy general market. It is the outdated Wall Road adage, “a rising tide lifts all boats”. In that backside panel, breaking the relative downtrend is actually what this group wants.

Backside 10 Industries Final Week

I discover about half of the above trade teams to be bullish on their charts. Attire retail ($DJUSRA) has been very sturdy since its early-June low and the current promoting seems to be a deal with off of a cup:

The massive spike in quantity seemingly was the results of Hole’s (GPS) huge quantity, which accompanied a much-stronger-than-expected quarterly earnings report. The DJUSIB, DJUSRD, DJUSMF, and DJUSHN all had been among the many 10 greatest losers final week, however nonetheless present technical promise, in my view. The DJUSIB, specifically, seems strong, having damaged to a 52-week excessive earlier this month and nonetheless buying and selling nicely above its rising 20-day EMA.

Prime 10 Shares – S&P 500/NASDAQ 100

Backside 10 Shares – S&P 500/NASDAQ 100

Massive Image

We cleared one more hurdle on the S&P 500 as we cleared the 4500 degree. After reaching a excessive of simply over 4600 in July and pulling again to 4103.78 on October twenty seventh, the bulls are again in cost. The S&P 500 is now nearing its 2023 excessive, simply 2% away. The current restoration is simply another reason why I wish to take a step again and consider the “Massive Image”, far more simply recognizing the present secular bull market:

The underside panel highlights the 240-month (20 yr) fee of change (ROC). I like to have a look at this for perspective. Whereas many bearish analysts consider we have run too far to the upside and have a number of draw back forward, this 240-month ROC tells me a totally completely different story. This ROC has come nowhere near the highs we noticed within the earlier two secular bull markets. If something, this implies we may have far more upside forward than any of us can think about proper now. It is one cause why I consider the S&P 500 may triple over the subsequent 8-10 years, earlier than we hit the subsequent secular bear market.

Sentiment

I take a look at two key sentiment readings – the Volatility Index ($VIX) and the equity-only put-call ratio ($CPCE). Others use surveys, however I do not belief these. In any case, would not you moderately see what merchants are doing with their cash moderately than their lips? Yeah, me too.

Volatility Index ($VIX)

The very first thing to grasp is that the VIX is a calculation of “anticipated volatility” forward. The calculation is predicated on the pricing of short-term S&P choices. I wish to view this as my “market maker sentiment studying”. Market makers set the premiums that they require choice holders to pay. If market makers want to shield themselves in opposition to unstable market motion, they will put increased premiums on choices. If we’re in a boring market atmosphere (almost at all times happens in bullish market environments), premiums are a lot decrease and indicative of little volatility forward. Market makers are giving us a GREAT BIG CLUE as to the place they see the market heading.

Usually, a VIX over 20 suggests a reasonably excessive expectation of bother forward as when the VIX rises above 20, you actually wish to keep away from taking any pointless dangers on the lengthy aspect. As an alternative, you wish to hunker down. The upper the VIX degree goes, the extra unstable and scary the motion can get. VIX readings above 30 normally require market capitulation earlier than we get a extra tradable market on the lengthy aspect.

If the VIX is within the 17-20 vary, I am normally on excessive alert. If it is falling on this vary, it could actually a really bullish sign. If it is rising on this vary, nevertheless, and approaching 20, warning can be instructed as promoting may escalate rapidly. At this level, if I used to be lengthy and needed to remain lengthy, I would contemplate a coated name technique, should you’re conversant in choices. You may get a pleasant premium and it is a approach to at the least hedge a bit in opposition to your lengthy positions.

Essentially the most bullish atmosphere is when the VIX is beneath 17 and declining. We have seen that not too long ago. Here is the place the VIX at present stands:

Take a look at that first large spike within the VIX again in March. That needs to be ingrained in your thoughts. That is what can occur when the VIX strikes via 20 resistance and accelerates. The inventory market took a tumble of roughly 250 factors in a single week. The October scare noticed the VIX soar 50% in a pair weeks, clearing 20 and reaching a excessive simply above 23. That coincided with one other vital selloff because the S&P 500 once more misplaced about 250 factors.

Take a look at these thick pink/blue directional strains in November, although. Because the VIX got here tumbling down, we had a large market rally as worry started to dwindle. All of this occurred throughout what we already knew was THE most bullish interval traditionally of your entire yr. That is how we will put puzzle items collectively within the short-term to extend our likelihood of constructing nice market calls.

Fairness-Solely Put-Name Ratio ($CPCE)

Whereas the VIX is a market-maker-related sentiment sign, the CPCE tells us what the retail dealer is doing with their cash. Simply remember that when retail choice merchants all begin to pile in on the identical aspect of the commerce, it normally ends in very ugly vogue for them. We’re on the lookout for the “rubber band to stretch” considerably in both bullish or bearish vogue and we place ourselves on the other aspect, ready for the “snap again”. In my expertise, any time the 5-day SMA of the CPCE hits .75, excessive worry is constructing and we must always start on the lookout for a market backside. Typically this 5-day SMA studying can attain as excessive as .85-.90 earlier than a backside is reached, so this is not a precise science. The primary level I am making is that, should you’re shorting or buying and selling fairness places, it’s good to perceive that your income may swiftly disintegrate as soon as the 5-day SMA of the CPCE strikes previous .75.

Here is a historic chart of the CPCE (5-day SMA) for example how this works:

The low 5-day SMA readings beneath .54-.56 have been strong indicators in marking short-term tops, whereas excessive 5-day readings above .75 have been glorious in offering us clues of market bottoms. The final studying was circled in pink, as a result of it occurred whereas the market was accelerating to the upside. This tells me that we nonetheless have PLENTY of doubters as we rally. I consider that is a really bullish sign.

Inflation

On Tuesday morning, the October CPI report was launched, adopted by the October PPI report on Wednesday morning. Each studies proceed to emphasize that inflation is FALLING and it has been constantly for over a yr. The inventory market LOVES this information and is now rising to be priced accordingly. Do you consider inflation stays a giant downside? Needless to say the Fed is most fascinated with Core CPI, so beneath you will discover a chart of absolutely the month-to-month Core CPI numbers with two panels beneath. The primary exhibits the annual Core CPI (12-month fee of change) and the second panel exhibits the 1-month fee of change (ROC) of Core CPI:

The annual fee is dropping each single month and is now again to 4%. We’re not on the Fed’s goal fee of two%, however the final 4 month-to-month CPI will increase have been within the “regular vary” for the previous 30-40 years, between 0.5% and 0.3%. If inflation stays on this space, we’ll be approaching the Fed’s goal inflation degree by June 2023, which is when many analysts consider the Fed will begin reducing rates of interest to spark a slowing financial system. It is fascinating how this inflation information strains up nearly completely with that narrative.

Intermarket Evaluation

Along with following technical value motion on our main indices, identical to most technical analysts, I consider it is extraordinarily vital to watch key intermarket relationships as nicely. The 2 major relationships for me are (1) XLY:XLP to observe the rotation between the extra aggressive discretionary sector (XLY) and the extra defensive staples sector (XLP), and (2) QQQ:SPY to watch the rotation between the extra growth-oriented NASDAQ 100 and the extra value-oriented S&P 500. The previous is extraordinarily vital, as a result of our GDP is comprised roughly of two-thirds client spending. Watching to see the place these client {dollars} are going helps us decide whether or not buyers are in a “threat on” or “threat off” mode. The previous is bullish, whereas the latter is bearish.

So the place do these two relationships stand as we speak?

XLY:XLP

My evaluation options this relationship “ignoring gaps” and “together with gaps”. I consider the inventory market is very manipulated, particularly on the opening bell. A niche down is a good way to “encourage” unsuspecting merchants to promote and a spot up is a good way to “encourage” those self same unsuspecting merchants to purchase. The highest panel ignores that opening bell exercise and focuses ONLY on the rotation in the course of the buying and selling day. You’ll be able to’t plot this on a chart with common information. So as get this intraday rotation, you have to hold a Consumer-Outlined Index at StockCharts, which is precisely what I do. What we noticed throughout a lot of the correction was a weak S&P 500, however a strengthening XLY:XLP. It was a moderately vital sign that the S&P 500 promoting wouldn’t final. Now we see the consequence as our main indices scream increased as soon as once more.

QQQ:SPY

Whereas the S&P 500 has but to interrupt above its July excessive close to 4600, this ratio has damaged out whether or not we embrace or ignore gaps. Once more, it is a bullish sign as the massive Wall Road companies purchase into the extra aggressive progress index, whereas concurrently showing on CNBC to unfold indecision, worry, and generally, outright doom and gloom. Comply with the charts, not the lips on CNBC.

Commerce Setup

I focus on potential commerce setups right here from a LONG-TERM perspective. These should not trades the place you are hoping to leap in, make 10-15%, then promote and transfer on to one thing else. As an alternative, I focus right here on shares that usually have strong long-term monitor data. Getting into on the present degree may make sense as a consequence of numerous components.

Right now, I wish to spotlight Seagate Know-how Holdings (STX) because it has carried out higher than the S&P 500 over time and it additionally has carried out a lot better than one in all its major rivals, Western Digital Corp (WDC). I additionally just like the current technical breakout on STX after languishing largely in the course of the 2022 cyclical bear market and the current market correction from July to October:

One other constructive with STX is that it pays a wholesome $2.80 dividend ($.70 per quarter), which leads to a 3.69% dividend yield, not a nasty addition to the strong long-term capital appreciation.

Trying Forward

Upcoming Earnings:

Earnings season is slowing down now and most large firms with calendar quarter ends (March, June, September, and December) have already reported their quarterly outcomes. There are just a few, nevertheless, that do report in different months and you may see beneath that NVIDIA Corp (NVDA) is a kind of. The next earnings studies (market cap in parenthesis) are, in my view, at the least comparatively vital and value watching. That is NOT a listing of ALL firms reporting this week, so please you’ll want to test for earnings of any firms that you simply personal or add:

• Monday: A ($33 billion), KEYS ($24 billion), ZM ($19 billion)
• Tuesday: NVDA ($1.2 trillion), LOW ($117 million), ADI ($90 billion)
• Wednesday: DE ($109 billion)
• Thursday: None – Market Closed for Thanksgiving Day Vacation
• Friday: None – Market Closes Early at 1pm ET

Key Financial Studies:

• Monday: Main indicators
• Tuesday: Present house gross sales, FOMC minutes
• Wednesday: Preliminary jobless claims, sturdy items, client sentiment
• Thursday: None – Market Closed for Thanksgiving Day Vacation
• Friday: None – Market Closes Early at 1pm ET

Historic Information

I am a real inventory market historian. I’m completely PASSIONATE about learning inventory market historical past to offer us extra clues about seemingly inventory market path. Whereas I do not use historical past as a major indicator, I am at all times very conscious of it as a secondary indicator. I find it irresistible when historical past strains up with all my different indicators, offering me far more confidence to make specific trades.

Every week, I am going to present you the common annualized returns for every calendar day and by index. Listed here are the historic numbers for this week:

S&P 500

• November 20: -32.39%
• November 21: +55.64%
• November 22: -1.21%
• November 23: +49.61%
• November 24: +127.98%

NASDAQ

• November 20: -90.10%
• November 21: +74.67%
• November 22: -17.21%
• November 23: +34.13%
• November 24: +230.95%

Russell 2000

• November 20: -72.94%
• November 21: +71.46%
• November 22: -9.82%
• November 23: +63.10%
• November 24: +255.15%

The S&P 500 information dates again to 1950, whereas the NASDAQ and Russell 2000 info date again to 1971 and 1987, respectively.

We at the moment are in probably the most bullish interval of the calendar yr. The shut on October twenty seventh via the shut on January 18th is THE ABSOLUTE BEST TIME OF THE YEAR FOR U.S. EQUITIES – HISTORICALLY SPEAKING. Final week was an “okay” interval for equities, however the upcoming week usually sees far more historically-bullish motion and this bullishness extends via the primary week of December.

Ultimate Ideas

As we transfer into the Thanksgiving vacation season, let’s hold just a few issues in thoughts:

1. Historic bullishness shouldn’t be ignored. 73 years of information on the S&P 500 inform us that NOW is the perfect time of the calendar yr to be bullish and to be lengthy. Battle this historic bullishness at your individual threat.
2. The ten-year treasury yield ($TNX) has misplaced neckline assist in a topping head & shoulders sample, with its preliminary measurement pegged close to the 4.10% degree
3. Key intermarket relationships level to the sustainability of the present S&P 500 rally; 4600 is the subsequent vital take a look at, with a breakout seemingly sending us increased to check the all-time excessive close to 4820
4. NVIDIA Corp (NVDA) studies its earnings on Tuesday after the bell; this can be vital not just for NVDA, but additionally for your entire semiconductor group ($DJUSSC). I anticipate large numbers from NVDA, but it surely has run loads in November, now testing essential value resistance at 500.
5. Small caps (IWM) have proven enchancment, however proceed to observe the KRE (regional banking ETF) and XBI (widely-diversified biotech ETF) for clues about future relative power; these are the 2 trade teams that almost all closely affect IWM efficiency.
6. As I identified final week, TG Therapeutics (TGTX) is a robust quick squeeze candidate, with over 27% of its float quick. The closing breakout degree of 11.88 supplied was cleared on Friday’s shut and we now see the consequence as TGTX is up greater than 5.5% at my final look. Quantity is choosing up and there is little overhead value resistance. Shorts may very well be protecting large time later as we speak. Wildly accelerating quantity would be the main clue {that a} vital quick squeeze is, actually, underway. Brief squeeze trades are ALWAYS extraordinarily dangerous, however this one has the potential to fly this week.
7. I wish to want everybody a really blissful Thanksgiving vacation weekend. In case you’re touring to be with family and friends, please be protected!

Suggestions

If you would like to share your ideas on our Weekly Market Report, constructive or damaging, you’ll be able to attain us at “assist@earningsbeats.com”.

Completely satisfied buying and selling!

Tom