Market obstacles, new budget plan, 3 trading questions, gains


Never try to accelerate on a freeway or around a slower vehicle, only to realize that what you are driving can sometimes skip a gear if you are not careful. Defective transmission. Driver defective. Same result. Do not attempt to pass if you see headlights coming the other way.

In a sense, this is what happened to the stock markets on Tuesday. The final score might look “correct”, with the “big three”, the Dow Industrials, the S&P 500 and the Nasdaq Composite all closing in the green, if only a tiny bit. The final score may look pretty healthy with nine of the 11 selected SPDR ETFs from the S&P sector also closing above sea level. Interestingly, the ex-Energy Defensive (XLE) type sectors dominated the chart. daily performance. You should know that all the stock market indices of small and mid caps closed in the red. Note that the S&P 500 and Nasdaq Composite peaked in the first 90 minutes of trading, then spent five hours rocking back and forth, gasping for air.

Finally, it should be borne in mind that aggregate trading volumes, at least for the Nasdaq, were not only high, they were huge. Keep in mind that it was the Nasdaq Composite, not the S&P 500, that ended the recent correction, so that might matter. The Nasdaq Composite closed higher in eight of the last 10 sessions. For the S&P 500, that’s nine out of 10. Take a look at the Nasdaq Composite subordinate trading volume …

I want readers to notice a few things that can be seen on this daily Nasdaq Composite chart. First, note the solid black candlestick (as opposed to the bottom) for Tuesday. This indicates that even though the index closed for the day, it closed lower than its open level. Now note that algorithmic resistance has taken its toll as the index has come close to a few points off the early September high. Yes, we have a golden mini swing traders cross (21-day EMA crossover of 50-day SMA), but we also have a very large trading volume (bottom right) for the session.

What this confirms to me is that there has been a significant increase in professional sales / institutional profit taking triggered by the movement of the Nasdaq Composite towards this historic high. Many refer to this type of action as a “dropout” … and it may, but does not necessarily mean, change to come. Just think of it … like a flare. What happens when someone sets off a flare? You drop to the ground, cover one eye to preserve your natural night vision, and what else? Okay … you see the field. You see where the resistance is. Same here.

You now know that the Nasdaq Composite, possibly the other large cap indices as well, is potentially building a base. Could the index benefit from consolidation? Sure. Investors should recognize that October has now tested the September high as well as the July low. This index may already be consolidating. What will be telling will be if the index moves to the middle of the range this week, or makes another run to that higher.

My instinct – term for unqualified opinion – is that after some agitation another attempt is made. But there are key hurdles on the immediate front of the market. The headlines change every day when it comes to potential fiscal policy. Oh, and let’s not forget, the Fed is (almost certainly) announcing its decrease in monthly asset purchases a week from today. It cannot piss off investors. Then again, most investors probably don’t understand that they are now just passive bots under the guidance of keyword reading algorithms. How will memoryless and common sense keyword reading algorithms, just a relentless effort to force technical overshoots… react to these headlines? Hmmm.

Something new?

While the Biden administration’s “social spending and climate change” fiscal framework has been slashed from the $ 3.5 trillion originally proposed to probably less than $ 2,000 billion, it has not become easier to pay. The original plan, as we’ve discussed here, called for an increase in the base corporate tax rate from currently 21% to at least 25%, and up to 27% or 28%. We talked about moderate Senator Kyrsten Sinema (D-AZ) and her strong opposition to increasing this tax rate, and how much that matters because the Senate is split 50/50 and the Republican side is more unified than the Democratic caucus.

A new plan was drawn up this week by Democratic Party leaders in the Senate. Not the proposal to tax unrealized capital gains for billionaires. This one must have been imagined by a six-year-old, or at least a cognitive costume wearing “zero” with no aptitude for economics. Unless his plan is in the first place to force large companies to withdraw massively from public procurement.

No, this new plan has a chance. I am now talking about the proposed 15% minimum tax rate for large corporations that report net income of $ 1 billion or more for three consecutive years. Currently, a rule like this would impact around 200 US companies. Democratic lawmakers estimate that in constant (unlikely) terms, this plan would raise between $ 300 billion and $ 400 billion over a decade. The difference here is that it looks like Senator Sinema may well agree with this idea, as it does not crush the small and mid caps that are just recovering from the pandemic in a much more difficult environment for them. input costs, including labor.

So confident

Pleasantly surprisingly on Tuesday, the Conference Board’s October reading for consumer confidence came in at 113.8, well above consensus expectations, and up from September’s revised 109.8. Hooray. Apparently Americans are now seeing the light at the end of the COVID-19 Delta variant tunnel, and that matters more than inflation, which is still on their minds.

The proportion of respondents planning to buy a house, car or major household appliances increased this month, as nearly half of all respondents said they intended to take a vacation at some point during the course. the next six months. This is the first time since March 2020 that so many people responding to this monthly survey were planning to go on vacation. Would not it be nice ?

“Wouldn’t it be nice if we could wake up

In the morning when the day is new?

And after spending the day together

Stand close to each other all night long “

– From Would not it be nice (Wilson, Asher. Love), The Beach Boys (1966)

Answer your trading questions

My incoming email had a Tuesday theme. I mean in addition to 95% spam. Either people wanted to thank me for the United Parcel Service (UPS) call, which was a home run, or they wanted to ask me very politely what had happened with my Lockheed Martin (LMT) call, which is become the opposite of a home run. There was also an Nvidia (NVDA) issue.

A … United Parcel Service. I told you Carol Tome had this. Some looked at the numbers from FedEx (FDX) and worried about UPS. Big gap between Carol and what they have there. From now on, UPS will lift FDX as both benefit from what is and will be a clear power over pricing despite rising fuel costs. In the nine months of 2021, UPS generated more operating profits than in any full year in the company’s history. Certainly not? Yeah, man.

Readers will see that UPS removed the $ 219 pivot on Tuesday. This allows us to move the target price up to $ 260 and the panic point up to $ 191. Potential problem? The gap at the end of July was finally closed … by another unfulfilled gap. I would expect that before we can truly consider this pivot as ‘caught and held’ there will be at least one attempt this week to close the $ 205 / $ 213 gap created overnight Monday through Tuesday.

Two … Lockheed Martin. I find it hard to express how disappointed I am with this name. I can almost handle the lack of income. It gets more difficult when you realize that Missile and Fire Command, aeronautics, and rotary and mission systems have all missed their mark. The company, however, exceeded expectations for the bottom line. Going forward, the company has forecast lower revenues for the full year, but higher profits. It is the expected decrease in net sales for fiscal 2022, which I find unacceptable. Not unacceptable for the company, but unacceptable for LMT to keep its place on my pad for the moment. I decided to quit this post.

I am currently long at 300% of what I consider to be a full position (10% is where I was 24 hours ago), which is not how I would suggest everyone to come out of a damaged long position, but as you can see stocks have closed well above their lows and still leave an unmet bullish gap which will likely be closed at some point. How long will I stay in the name? Until I take back what is mine. Not against net basis … but against Monday. Already wiped out two-thirds of this 12% success. Tag, it’s you.

Three … Nvidia. Yes, the expectation of Facebook (FB) to spend a lot on building the metaverse is Nvidia’s gain. No one is on par with Nvidia when it comes to high-end GPUs, and maybe only Lisa Su’s Advanced Micro Devices (AMD) can even compete. By the way, AMD reported last night.

Another break after the pivot, yet another open gap left in the wake of the action. However, the actual breakout occurred on Monday, perhaps increasing the likelihood of support at the pivot. My new target price for NVDA is $ 276, my new panic point is $ 212.

Tuesday night earnings

Sarge favorites AMD and Microsoft (MSFT) both reported absolutely impressive third quarters. Ooh-stink-rah. Alphabet (GOOGL) also reported an amazing quarter with a few warts, but that one wasn’t my appeal, and I didn’t follow the name for long. Not enough space or time to go into detail here. I’ll have to come back with another piece to Real money and Real money shortly. Until then, we are walking. Oh, the pumps. To start.

Economy (All Eastern hours)

8:30 a.m. – Durable goods orders (Sep): Expecting -1.0% m / m, last 1.8% m / m.

8:30 am – ex-Transport (Sept): Waiting 0.4% m / m, Last 0.2% m / m.

8:30 am – ex-Defense (Sept): Waiting 0.4% m / m, last 2.4% m / m.

8:30 a.m. – Basic equipment items (Sep): Waiting 0.4% m / m, Last 0.5% m / m.

8:30 am – Inventories of wholesalers (sept-adv): Waiting 0.8% m / m, Last 1.2% m / m.

8:30 a.m. – Merchandise trade balance (Sep): Last $ 87.6 billion.

10:30 am – Oil inventories (weekly): Last -431K.

10:30 am – Gasoline stocks (weekly): Last -5.368M.

The Fed (All Eastern hours)

Fed blackout period.

Highlights of today’s earnings (Consensus expectations for BPA)

Before opening: (BA) (-.14), (KO) (.58), (GD) (2.99), (GM) (.92), (MCD) (2.46), (NSC) (2.92), (R) (2.08)

After closing: (F) (0.27), (KLAC) (4.50), (NOW) (1.39), (URI) (6.81)

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