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December 15, 2023
Hello, and welcome to Traders on Trend, the newsletter that keeps you updated on the latest trends and tips in the stock market. This edition is brought to you by Trading Pub, the online community where you can learn, share and trade with the pros.
Today, we have a lot of interesting news and insights for you. First, we’ll tell you which stock is soaring thanks to Jerome Powell’s dovish stance. Then, we’ll show you the chart of the day, featuring a bullish pattern on CVNA. Next, we’ll give you the market-moving news, covering the winners and losers of the day, the Fed’s outlook, and the economic indicators. Finally, we’ll spice things up with some fun facts and trivia that you won’t want to miss.
Are you ready to dive in? Then let’s get started!
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Today's Market Mood: EXTREMELY BULLISH!
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Daily Market Roundup and Strategy
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It was another day of frothy gains, fueled by the heady cocktail of dovish Fed whispers and surprisingly robust retail sales. The Dow Jones, still buzzing from yesterday's record high, clinked its glass to another all-time peak, while the S&P 500 reached for a two-year high, extending its winning streak to five.
Remember that rate-cut mirage shimmering on the horizon? It seems investors downed a double shot of optimism, convinced the Fed's tightening tap might soon transform into a gushing fountain of lower rates. Retail sales, defying gravity and analyst projections, added fuel to the fire, proving consumers haven't been spooked by inflation or higher borrowing costs.
Of course, not everyone's dancing the Macarena on Wall Street. Some wise heads, meaning our research team, reckon the market might be a tad tipsy from all the good news. "Technicals are bullish, but we're stretched," they cautioned, suggesting a potential hangover in the near term.
Where do we stand amidst this heady rally? Here's the scorecard:
- S&P 500: +0.3%, sipping on its fifth straight green smoothie
- Dow Jones: +0.4%, another record high for the history books
- Nasdaq: +0.2%, cautiously joining the party
- 10-year Treasury yield: -11 basis points, diving below 4% for the first time since August
- VIX: +0.25, a slight tremor amidst the exuberance
- Financials: Leading the charge, Goldman Sachs popping nearly 6% and banks basking in the low-rate sunshine
- Russell 2000: The small-cap champ, flexing its muscles with a 2.7% surge
Looking ahead, the buzz remains around the Fed's next move. Will they keep pouring the hawkish Kool-Aid, or switch to dovish Dom Perignon? Keep your eyes peeled on economic data and central bank pronouncements.
Feeling the FOMO from the market's hot streak? Don't ditch your strategy just yet. Low rates might mean boring financials and utilities outperform the flashy growth stocks for a while. Time to switch teams?
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So, the Fed's hinting at rate cuts and stocks are dancing like it's 1999? Let's just hope Jerome Powell doesn't try the Macarena – everyone remembers how Greenspan's salsa steps led to the dot-com bubble bursting. Remember, even a dovish Fed can have two left feet!
Bonus Trivia: Did you know the word "bull market" originally came from bullfights? Apparently, investors felt "bullish" when the matador got gored, because it meant the market would likely rise (while the poor bull, metaphorically speaking, took a tumble). Cheers to a less barbaric way of making money!
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$CVNA - Cup and Handle Breakout? ☕☕☕
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CVNA's chart is sending some mixed signals, but the overall vibe is decidedly bullish. Buckle up as we dissect the tea leaves (or should we say, tire tracks?):
Cup and Handle in Sight: Look closely at those lime green lines. Don't they form a perfect cup and handle pattern? This classic bullish formation suggests a potential price surge after a period of consolidation.
RSI and Volume Gearing Up: See how the RSI (Relative Strength Index) and volume indicators are steadily climbing? That's bullish fuel right there, hinting at increasing buying pressure and momentum.
Resistance on the Horizon: Remember that red line at $36.63? That's resistance, and CVNA recently broke through it with zeal. But like any good thrill ride, there might be a dip before the next climb. Keep an eye on that $24.98 support level (green line) – it's been a reliable bounce point in the past.
Moving Averages Adding Intrigue: CVNA's currently chilling near its 200-day moving average (purple line), which is like a comfy couch for the price. The 50-day MA (light blue line) is nearby, adding a touch of tension. Watch how the price interacts with these lines – they could turn into springboards or roadblocks.
Strategy:
- Confirm the Uptrend: Wait for a break above $37 before jumping in – that's your green light for a bullish party.
- Mind the Support: If CVNA dives below $20.50 (orange line), things could get bumpy. Watch for potential buying opportunities around $10.
- Earnings Watch: Q4 earnings could be the make-or-break moment. Fingers crossed for a Michelin-starred report!
- Bottom Line: CVNA's chart is a story of potential, with both sunshine and storm clouds on the horizon. Stay tuned, trade smart!
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Tesla Back on TOP Thanks to...Powell?!
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You're welcome?! - Powell Maybe
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Tesla's stock, like a well-built EV, navigates challenges with unexpected agility. This week's hurdles – a hefty recall and tax-credit hiccups – barely dented its momentum, thanks to a Santa Claus rally fueled by the Fed's dovish whispers.
Recalls? Meh. We've said it before, car recalls, for Tesla at least, are more PR hiccups than dealbreakers. Fixing autonomous driving software glitches is a minor bump in the road, especially when the tech itself holds future-proof potential. Even the skeptical NHTSA nods in agreement.
Tax Credit Twists? A Tangled Knot. Losing the full $7,500 credit on some Model 3s stings, but it affects a limited slice of the lineup. The bigger worry might be the pricing shuffle it triggers – performance versions suddenly cheaper than long-range ones? Not ideal.
Fed to the Rescue? Ho-ho-hold the Brakes. Just as investors digested the credit news, the Fed delivered its Christmas cheer: steady rates and a promise of 2024 cuts. Cue the market surge. Lower rates? Music to carmakers' ears, translating to sweeter customer deals and easing Elon Musk's rate-hike lamentations.
Let's face it, in a rising market, most stocks get swept along. That's where beta comes in, a nerdy measure of how a stock typically dances with the market. Over the past year, Tesla's beta is a sprightly 2, meaning a 1% market jump translates to a roughly 2% Tesla leap. This week's market rally propelled Tesla 3%, with an extra 2.5% bonus thanks to the rate-related car boost.
What’s next for Tesla shares? The recent jump has put Tesla stock in the middle of its trading range over the past six months. Investors are waiting for something new to happen. That could be fourth-quarter deliveries, or earnings, or lower rates.
The first two will affect Tesla stock no matter what the market does. Lower rates, on the other hand, will help most stocks, Tesla included.
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Market Movers: From Melanoma Miracles to Downtrodden Digital Media
Software Stumbles: Adobe's earnings and forecast hiccup sent its stock tumbling 6.3%, dampening the software giant's usually buoyant spirits. Weaker-than-expected numbers for 2024 cast a shadow, but other sectors enjoyed brighter spotlights.
Retail Revamp: Foot Locker stepped up its swagger with a 10% surge thanks to an analyst upgrade and promises of expanding profit margins next year. Meanwhile, Trip Advisor booked a 6% climb on the optimism surrounding its new leadership and booking engine.
Live Nation's Encore: The music never stops for Live Nation, which serenaded investors with a 5.6% gain after analysts declared the event giant's future the "healthiest" in the entertainment scene.
Energy's Euphoria: Marathon Petroleum found its happy place, rising 2.6% on upbeat predictions of profitable refining margins. And Occidental Petroleum felt the Buffett love, adding 2.7% after the Oracle of Omaha revealed a $590 million stock purchase.
EVs Electrify: Rivian revved up 14% after teaming up with AT&T to green its fleet with electric vehicles. The partnership promises a jolt to Rivian's future sales.
Homebuilder Highs: Lennar hammered home its dominance, reaching a record high and gaining 71% this year as falling interest rates fueled optimism in the housing market.
Fed Flips the Script: The central bank's dovish turn was the soundtrack to the market's melody. Hopes for rate cuts in 2024, fueled by slowing inflation and firmer labor data, painted a picture of a potential "soft landing" for the economy.
Retail Report Reassures: Consumer spending defied expectations, showing a 0.3% rise in November. While this might raise some inflation concerns, it also underscores the enduring strength of American wallets.
Jobless Claims Drop: Initial claims dipped below forecast, offering a glimmer of hope in the labor market. However, rising continuing claims indicate a bumpy road ahead for employment.
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Random Musings and the Time Machine
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Did you know?
The Curious Case of the Vanishing Penny: Ever wonder where all those pennies go? With electronic transactions on the rise, it feels like the humble penny might just become a relic of a bygone era. Perhaps they're all hiding in piggy banks, waiting for their moment to shine again.
Coffee and Stocks: Isn't it interesting how a cup of coffee and the morning's stock prices have become the modern breakfast of champions? Both stimulate, both are subject to volatility, and let's face it, both are essential to kickstarting our day.
The Art of Financial Forecasting: Predicting market trends is a lot like weather forecasting, but with less Doppler radar and more economic indicators. Both can be unpredictably cloudy with a chance of surprise gains.
The Silent Power of Compounding: In the world of finance, compounding interest is like a quiet superhero. It might not wear a cape, but it's definitely working its magic in the background, turning small savings into mountains over time.
The Mystery of the Lost Socks and Stock Dips: Just as socks mysteriously disappear from the laundry, sometimes stock values dip without a clear reason. If only finding the cause of a stock's dip was as simple as finding that missing sock!
On this day in history, December 15:
1791: The Bill of Rights, the first 10 amendments to the U.S. Constitution, was ratified by the states. The Bill of Rights guarantees the rights and freedoms of the American people, such as freedom of speech, religion, and press, and protection from unreasonable searches and seizures.
1932: The New York Stock Exchange reopens after a four-month closure triggered by the Great Depression. Talk about a Black Friday that lasted, well, almost half a year.
1971: President Nixon suspends the convertibility of the dollar to gold, essentially severing the tie between the greenback and precious metal. Inflationary fireworks ensued, proving even gold markets have their glitter fade.
1994: Bill Gates becomes the world's richest man, dethroning Japanese real estate mogul Yoshiaki Watanabe. A reminder that tech titans, not land barons, rule the wealth game these days.
2007: The London Interbank Offered Rate (LIBOR) is manipulated by several major banks, sparking a global financial crisis. Don't worry, they promised to be good this time… maybe.
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While the Fed's dovish breeze feels encouraging, remember, the market twists and turns.
As Mark Twain famously said, "The market can stay irrational longer than you can stay solvent." Keep your risk tolerance in check, adjust your strategy with each turn, and focus on the long-term destination, not just the immediate scenery.
And perhaps, a touch of Will Rogers wisdom: "Buy land, they're not making it anymore." In today's digital age, maybe that includes virtual territory too. Just something to think about!
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