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December 13, 2023

 

Greetings traders! Welcome to another edition of Traders on Trend, the newsletter that keeps you updated on the latest trends and insights in the stock market.

 

Today’s newsletter is brought to you by DTI - Your Roadmap to the Market. DTI is a leading provider of trading education and tools that help you navigate the market with confidence and success.

 

In today’s issue, we will explore a burning question that has been on everyone’s mind lately: Will a Fed rate cut be bad news for stocks? Some experts say yes, while others say no. Who is right and who is wrong? We will examine the arguments and evidence from both sides and give you our take on what to expect from the Fed’s next move.

 

But that’s not all. We also have some exciting segments for you, such as:

 

Chart of the Day: IBM's potential turnaround - is this tech giant about to warp into the next big thing?

Market Moving News: A summary of the most important news and events that affect the market and your portfolio.

Fun Tidbits: Some random and fun facts and trivia that will make you smile and learn something new.

 

So, without further ado, let’s get started with today’s newsletter. We hope you enjoy reading it as much as we enjoy writing it. Happy trading!

 

Today's Market Mood: EXTREMELY BULLISH!

 

Daily Market Roundup and Strategy

 

What a day for the bulls! The S&P 500 and other major indices soared to new highs on Tuesday, as investors ignored the mild inflation surprise and focused on the Fed’s expected pause on rate hikes. The market seems to be betting that the Fed will keep the money flowing and the economy humming, even as inflation cools down from its recent spike.

 

But don’t get too complacent. The Fed’s decision is not a done deal, and the market could be in for a rude awakening if the central bank signals a more hawkish stance on Wednesday. Fed Chair Powell will face the press after the meeting, and his words will be scrutinized for any clues on the future direction of rates. Will he stick to his dovish script, or will he hint at a possible rate hike in 2024? The market is on edge, and any deviation from the expected scenario could trigger a sharp reaction.

 

Closing figures from yesterday's session were as follows:

 

The S&P 500 index rose by 21.26 points (0.5%) to close at 4,643.70.

The Dow Jones Industrial Average gained 173.01 points (0.5%) to end at 36,577.94.

The Nasdaq Composite advanced by 100.91 points (0.7%) to 14,533.40.

The 10-year Treasury note yield decreased by approximately 3 basis points to 4.206%.

The Cboe Volatility Index (VIX) fell by 0.56 to 12.07.

 

Sector-wise, technology shares, including the Philadelphia Semiconductor Index (SOX), demonstrated robust performance, notwithstanding Oracle's 12% decline following a revenue shortfall. Financial shares remained strong, while energy shares faced headwinds amid declining WTI Crude Oil futures, which settled below $70 per barrel.

 

For investors, these market dynamics suggest a strategy anchored in cautious optimism. Diversification remains a key principle, particularly in sectors showing resilience or growth potential. In light of potential market volatility, a well-balanced portfolio can provide a steadier course. Monitoring the Federal Reserve's guidance is crucial, as it may significantly influence market directions.



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Market Mischief

 

Don't count your chickens (or rate cuts) before they hatch!

 

Investors are eyeing the Fed like hungry foxes stalking a coop of interest rate cuts. But remember, the Fed's a sly one, and this ain't no poultry farm. One hawkish cluck from Powell could send those rate cut expectations flying faster than a feather in a hurricane. 

 

Chart of the Day

$IBM: From brink to boom - The comeback story 🔙📈💥 

 

While the market was busy chasing the AI hype train last year, this old-school tech titan was quietly sharpening its edge in the field. Now, it seems ready to unleash its power and reap the rewards of the AI revolution.

 

The monthly chart shows a clear breakout from a long-term downtrend, signaling a bullish reversal. 2024 could be the year that IBM makes a comeback and regains its glory. Upside targets: 175, 190

 

Our analysis sees the initial target approaching, recommending vigilance with a stop loss set at 160. This isn't just a chart; it's a potential harbinger of IBM's resurgence as it aligns with the technological zeitgeist of the forthcoming years.



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Don't Cheer the Fed's Pivot Just Yet: Why Rate Cuts May Sting Stocks

 

The market's dancing on sunshine, convinced the Fed's pulled off a soft landing and rate cuts are just around the corner. But hold your horses, bulls, because this narrative might have a hidden sting.

 

Loosening monetary policy seems like a golden ticket to economic recovery, right? Cheaper borrowing fuels growth, companies flourish, and stocks soar. But it's not that simple. Remember, inflation's still a lurking wolf, and easy money can feed its hunger.

 

Here's the kicker: history whispers a cautionary tale. Stocks often slide AFTER the Fed pivots. Why? Because a rate cut usually signifies the central bank overtightened, hinting at something already cracked in the economic framework. This can trigger investor jitters, leading to a market correction.

 

So, while the market's basking in the anticipation of rate cuts, remember, it's a double-edged sword. Lower rates might not be the instant elixir everyone expects. Instead, they could be a symptom of unseen trouble, leading to a delayed market hangover.

 

Bottom line: Don't get swept away by the "rate cut party." Keep a skeptical eye on the Fed's pronouncements and stay diversified. The market's a fickle beast, and celebrating its pivots too early could leave you with a bitter aftertaste.

 

 

Market Moving News

 

In today's Market Moving News, the S&P 500 index (SPX) has closed at a high not seen since the early months of 2022, as investors opted to look beyond a confounding inflation report, setting their sights on the Federal Reserve's upcoming rate verdict.

 

Airbnb (ABNB) and Expedia Group (EXPE) found themselves on a downhill slide, both suffering a hit after Barclays' downgrade—an ominous forecast of a slowdown in online travel's golden run, as the wave of 'pent-up' demand begins to ebb and consumer purses tighten.

 

Applied Materials (AMAT) enjoyed an uptick, buoyed by TD Cowen's enhanced price target and a nod of approval for its performance, echoed by Deutsche Bank's target upgrade. Meanwhile, Blue Bird Corp. (BLBD) soared, flying over 10% higher post its earnings report that exceeded expectations, coupled with an optimistic outlook for the coming year.

 

In contrast, Hasbro (HAS) faced a downturn, announcing workforce reductions in the wake of subdued sales, while Lucid Group (LCID) saw its shares dip as its CFO made an unexpected exit. Johnson Controls International (JCI) also stumbled following an earnings report that didn't hit the mark.

 

Zillow Group (ZG), however, climbed after an analyst's thumbs-up for outperforming market predictions, spurred by projections of robust demand and softer interest rates on the horizon.

 

Looking ahead, earnings announcements loom from Adobe (ADBE) and Costco Wholesale Corp. (COST), with the latter poised to provide insights into consumer expenditure trends. Lennar Corp. (LEN) is also set to unveil its performance, potentially shedding light on the housing market's pulse.

 

On the inflation front, while the recent CPI report aligns with a trend of moderating price pressures, it remains a notch above the Fed's comfort zone. The looming Producer Price Index (PPI) will offer further clues to the inflation puzzle. With inflation persistently above the Fed's 2% goal, rate cut prospects appear dim, underscored by futures traders' tempered expectations as reflected in the CME FedWatch Tool's latest readings.



 

Random Musings and the Time Machine

 

Did you know?

 

  • The ticker symbol 'AAPL' for Apple may seem straightforward now, but it was a bold move in 1980—back when Apple was just a fruit and not a tech titan.
  • The term 'blue chip' hails from poker, where the blue chips hold the highest value—fitting for companies that are the bedrock of the stock market.
  • Bulls and bears make the market, but did you know Wall Street's 'Charging Bull' sculpture weighs a hefty 7,100 pounds, nearly as much as the average S&P 500 company's market cap in millions?
  • The New York Stock Exchange (NYSE) started under a buttonwood tree in 1792, proving that all towering markets start with humble roots.
  • An octogenarian investment mogul once won a $1 million bet that an S&P 500 index fund would outperform a basket of hedge funds over a decade—a victory for simplicity in a complex market.

 

 

On this day in history, December 13:

 

  • On December 13, 2000, the Federal Reserve opted not to change interest rates, sending a ripple of relief through a market wary of hikes—echoing today's anticipation of the Fed's rate decisions.
  • December 13, 1974, marked the day the Dow Jones broke the 600 barrier, a reminder that what goes up, does sometimes come down, and then goes up again.
  • On this date in 1989, the first of the high-speed telecommunications networks was approved by the FCC, paving the digital highway for today's high-frequency trading.
  • December 13, 1928, saw the Dow close at 300 for the first time, a mere fraction of today's muscular benchmarks.
  • On December 13, 1996, Alan Greenspan coined the phrase "irrational exuberance," a caution against market overconfidence still whispered in trading halls today.

 

 

The Final Ledger

 

That’s all for today’s edition of Traders on Trend, the newsletter that keeps you on top of the market trends and insights. We hope you enjoyed reading it and learned something new. Before we sign off, here’s a funny quote to end the day:

 

Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” - Paul Samuelson, Nobel Prize-winning economist.

 

We couldn’t agree more. Investing is not a game of chance, but a game of skill and patience. Don’t let the market noise distract you from your long-term goals. And remember, DTI is your Roadmap to the Market. Join them and learn how they can help you achieve your trading goals.

 

Until next time, happy trading! 😊



 

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