Market Heads Lower at Start of Massive Earnings Week

U.S. Stocks started higher today after a string of losing sessions in the previous week that brought yearly gains of the S&P and Dow Jones into the negative territory only to briefly return to positive today as all three indices fell in afternoon trading. Midterm elections will hold a cap on any serious rallies despite help from positive third-quarter earnings. Volatility should stay between $20-$28 until elections end next week and late stages of the bull market look to continue by the end of November and through first quarter 2019. SPY continues to trade in the range of $265 and $280 if these levels are violated expect the next level of support and resistance at $260 and $287. SPY Seasonal Chart forecast is shown below:

October, thus far, has been a bad month for assets and indices, with Nasdaq leading the way at 10% losses for the month. Although third-quarter earnings have been mostly positive the recent downturn can be attributed to the anticipation of the midterm elections, worry over global and domestic growth including fear that U.S. corporate earnings have peaked, geopolitical concerns, and concern regarding the Federal Reserve monetary policy. Still, there has been plenty to provide investors optimism. Beside third-quarter earnings, which have mostly beat expectations, last week GDP, consumer spending, and inflation numbers all reported positive movement. Inflation was down from 2% to 1.6% while consumer spending rose 4%. Government spending also rose, going from 2.5% gain last quarter to 3.3% for the current, while fourth-quarter growth rate is forecasted at 3%. Economists aren’t ready to declare 2018 second quarter as this year’s peak but will likely finish the year as so, with most seeing that quarter as the biggest beneficiary of the Trump tax cuts.

Shares of Ford, General Motors, Goodyear Tire, and other auto-related U.S. companies are seeing a nice boost today after it was recently reported China’s recently planned car-tax cut was dead after news made rounds last. News of the tax cut boosted Asian markets last week only to be sizable down today. Elsewhere, European markets were decently up today while in other EU-related news German Prime Minister Angela Merkel announced she will not seek reelection and her fifth term.

Big market-movers today include Red Hat Inc. which jumped to whopping 40% up on Thursday after it was announced IBM was buying its open-source software cloud company. IBM lowered around 3% after the announcement was made it would buy Red Hat for $190 a share in cash. There should be continued increased-movement in the market this week as third-quarter earnings in full swing. Today, over 100 companies will report while the rest of the week will feature big names such as Apple, BP, Coca-Cola, Facebook, General Electric, Mastercard, Sony, Yum!, Chevron, Exxon, and Berkshire Hathaway.

Using the “^GSPC” symbol to analyze the S&P 500, our 10-day prediction window shows mixed signals. Today’s vector figure of -1.14% moves to +1.00% in five trading sessions. The predicted close for tomorrow is 2,637.87. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.  

Volatility Performance

Even with increased volatility, Tradespoon technology has been able to provide strong results and accuracy in our post-selloff trading. Similar selloff, to the one we’re seeing this week, in mid-August resulted in 77% winning trades, or 7 out of 9!

Trade Breakdown

On October 16th, in the midst of last week’s volatility, we recommended Netflix (Option) at $0.54 and shorted the stock at $0.10 (36.36% Net Gain!), and that’s just one of many winning trades we had during volatility!

Highlight of a Recent Winning Trade

On October 23rd, our ActiveTrader service produced a bullish recommendation for McCormick & Co Inc (MKC). ActiveTrader is included in all Tradespoon membership plans and is designed for intraday trading.

Trade Breakdown

MKC entered the forecasted Entry 1 price range of $139.90 (± 0.70) in its first hour of trading and hit its Target price of $141.30 in the second to last hour of the trading day. The Stop Loss was set at $138.50.

Tuesday Morning Featured Stock

Our featured stock for Tuesday is Walmart Inc. (WMT). WMT is showing a confident vector trend in our Stock Forecast Toolbox’s 10-day forecast. This stock is assigned a Model Grade of (B) indicating it ranks in the top 25th percentile for accuracy for predicted support and resistance, relative to our entire data universe.  

*Please note: Our featured stock is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services.  If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader or ActiveInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.

The stock is trading at $100.21 at the time of publication, up 1.28% from the open with a +0.29% vector figure.

Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Note: The Vector column calculates the change of the Forecasted Average Price for next trading session relative to the average of actual prices for the last trading session. The column shows expected average price movement “Up or Down”, in percent. Trend traders should trade along the predicted direction of the Vector. The higher the value of the Vector the higher its momentum.

Oil

West Texas Intermediate for November delivery (CLX8) is priced at $75.49 per barrel, up 0.35% from the open, at the time of publication. Looking at USO, a crude oil tracker, our 10-day prediction model shows mostly negative signals. The fund is trading at $14.18 at the time of publication, down 1.08% from the open. Vector figures show +0.37% today, which turns -3.47% in five trading sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Gold

The price for December gold (GCZ8) is down 0.33% at $1,203.10 at the time of publication. Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows mostly positive signals. The gold proxy is trading at $116.22, down 0.47% at the time of publication. Vector signals show -0.04% for today. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.  

Treasuries

The yield on the 10-year Treasury note is up 2.29% at 3.14% at the time of publication. The yield on the 30-year Treasury note is up 2.32% at 3.39% at the time of publication.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see mixed signals in our 10-day prediction window. Today’s vector of -0.05% moves to -0.15% in three sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Volatility

The CBOE Volatility Index (^VIX) is up 2.36% at $24.73 at the time of publication, and our 10-day prediction window shows mixed signals. The predicted close for tomorrow is $22.91 with a vector of -8.85%. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.