Soaring Stocks but Scaredy-Cat Traders: What Traders Know That You Don’t!

January 4, 2024


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Today's Newsletter is Sponsored By Jack Carter


Greetings, Traders! While the market jitters might resemble a roller coaster, we'll be dissecting the mystery behind them like master detectives. Dive into the "why" behind the bearish blues, unravel the tangled threads of Fed minutes, and plot your next strategic move with expert insights from "Chart of the Day." 


Today’s Newsletter is Sponsored by: Jack Carter – unearthing market secrets to empower informed choices. Knowledge is power, and Jack's got the voltage.


The Economy's Paradox: Why the Jitters Persist?


"The economy's doing well? Then why do I feel like I'm drowning in bills?" – a sentiment echoing across America. We see soaring GDP, a resilient workforce, even a tamed inflation – yet, something remains amiss. This disconnect, my friends, is the puzzle we tackle today.


Prepare for a focused, informed journey through the market maze. Today, we're Traders on Trend, and the trends we uncover will guide your every investment decision.


Today's Market Mood: Moderately Bullish

The Bear-Bull Meter


Market Takes a Breather After Fed's Cautious Message


U.S. stocks continued their retreat into the new year yesterday, shedding gains from last year's rally as investors digested mixed signals from the Federal Reserve. The December FOMC minutes, released Wednesday, hinted at a slower pace of rate cuts than many had anticipated, prompting a wave of profit-taking across various sectors.


Tech stocks, the market's bellwethers, bore the brunt of the selling pressure, tumbling for the fourth consecutive day and dragging the Nasdaq down 1.2% to a three-week low. Retailers and banks also felt the chill, reflecting concerns about the potential for a prolonged period of high interest rates. Small-caps, typically considered more sensitive to economic conditions, also faltered, with the Russell 2000 dropping 2.7%.


However, the picture wasn't entirely bleak. Energy stocks defied the bearish mood, buoyed by a surge in crude oil prices. This sectorial divergence highlights the complexity of the current market, where individual factors are playing just as significant a role as broader macroeconomic trends.


Here's a snapshot of yesterday's closing:

  • S&P 500: 4,704.81 (-0.8%)
  • Dow Jones Industrial Average: 37,430.19 (-0.8%)
  • Nasdaq Composite: 14,592.21 (-1.2%)
  • Russell 2000: 2,201.35 (-2.7%)

The Fed's cautious message, while dampening hopes for a swift return to lower rates, also suggests a willingness to tailor future policy decisions based on evolving economic data. This leaves the door open for potential adjustments later in the year, depending on how inflation and growth indicators develop.


For investors, navigating this uncertain terrain requires a measured approach:

  • Focus on fundamentals: Prioritize companies with strong balance sheets and proven track records of profitability, rather than chasing speculative growth plays.
  • Embrace diversification: Spread your investments across different sectors and asset classes to mitigate risk and capitalize on potential pockets of strength.
  • Stay informed: Keep an eye on economic data releases and Fed pronouncements to adjust your strategies based on changing conditions.

The market's pause for reflection presents an opportunity for investors to reassess and rebalance their portfolios. By prioritizing resilience and adaptability, you can prepare for whatever the next chapter of this market story holds.


Remember, clarity often emerges after the dust settles.



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Market Mischief: Fed Minutes Put Tech Stocks on Timeout


Remember those fidget spinners everyone went crazy for? Yeah, imagine the Nasdaq like that, spinning furiously, then abruptly being grabbed by the Fed and plonked on the "think time" chair. That's what yesterday's FOMC minutes felt like for tech stocks – a sudden pause in the high-flying fun.


While oil stocks are doing the victory lap, tech's got its chin in its hand, pondering its future. But hey, maybe this timeout will give them time to invent the next big thing, like a robot therapist to soothe their investor anxieties. In the meantime, just promise not to fling any fidget spinners at the market, okay?


Chart of the Day

$RIVN: Sipping from the Cup, Waiting for the Handle



Rivian's chart is brewing something interesting: a classic cup formation. Think of it like a fancy mug waiting to be filled. We've got the smooth, rounded bottom - the good times - already in place. Now, we're just waiting for the handle to complete the pattern.


Where will this handle land? My money's on the $19.80 area, a sweet spot where both a price gap and a trend support zone converge. Think of it as the tea bag string, gently dipping into the cup's sweet spot.


Once RIVN settles around there, bulls can charge in. Eyes on that $24 resistance line, our first sip of profit. Breaching that? We're talking a full-blown tea party, potentially reaching $34 – the double whammy reward for recognizing this cup and playing it right.


Of course, no cup of tea is without its risks. Our stop-loss simmers at $18, a line in the sand to keep things from getting bitter.


So, is RIVN worth a brew? The chart suggests a tempting aroma. But remember, even the best tea needs time to steep. Keep an eye on that handle, and when it completes the pattern, raise your cup to a potentially rewarding trade.


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Why the Economy Feels "Blah" Despite the Numbers



While headlines trumpet a thriving economy with low unemployment and resilient GDP, a curious disconnect lingers – why do people still feel uneasy? The answer, it turns out, is far more complex than a simple "jobs good, feelings bad" equation.


It's true, traditional economic indicators paint a rosy picture. But dive deeper, and a different story emerges. Inflation, although retreating, remains a thief in the night, eroding wages and buying power. While the stock market boasts flashy headlines, its gains are concentrated in a select few sectors, leaving many feeling left behind.


This "hollow prosperity" fuels discontent. Surveys, unlike GDP and unemployment rates, capture the lived experience of the average person. They tell us about the anxieties of a changing job market, the sting of rising prices, and the social tensions simmering beneath the surface.


Climate change, another potent source of angst, adds to the mix. The "green revolution," while crucial, faces growing questions about practicality and cost. Electric vehicles, the poster child of eco-friendliness, come with their own set of drawbacks – limited range, hefty price tags, and a grid struggling to keep up.


Meanwhile, globalization and technological advancements, while promising long-term benefits, leave a trail of disruption in their wake. Jobs disappear, communities shift, and anxieties about the future fester.


Beyond economics, societal fractures deepen. Foreign policy entanglements, cultural divides, and a fractured media landscape sow discord and unease. These issues, though not directly measured by GDP, cast a long shadow on our collective well-being.


So, to simply blame low unemployment and high GDP for our collective "meh" feeling misses the mark. We need a broader lens, one that acknowledges the complexities of a changing world – the hollow wins, the unsettling disruptions, and the social tensions weaving through it all.


Bob Dylan sang, "The times they are a-changin'," and he wasn't wrong. It's a time of unease, yes, but also of potential. If we can acknowledge the nuances, navigate the disruptions, and address the inequalities, perhaps this "blah" feeling can evolve into something more hopeful, something truly aligned with the progress we aspire to.


This is not a call to ignore economic indicators, but to see them as one piece of a larger puzzle. The human experience is richer, messier, and more than just numbers on a chart. As we navigate this complex landscape, let's keep our eyes not just on the GDP, but on the hearts and minds of the people behind it.



Market Moves: Downward Dog Day on Analyst Downgrades, Eyes on Jobs & JOLTS


Downgrade Dominoes: Several stocks felt the analyst ax yesterday, sending them tumbling like dominoes:


  • BorgWarner (-5.3%): Baird & Co. saw electric vehicle headwinds and downgraded, sending BWA lower.
  • Keurig Dr. Pepper (-2.3%): Morgan Stanley's lukewarm coffee outlook cooled off KDP.
  • Rocket Companies (-6.6%): Wells Fargo saw valuation froth in RKT after its recent run-up.
  • Sofi Technologies (-14%): Keefe Bruyette's lowered expectations put SOFI into a tailspin.
  • Wendy's (-1.3%): Barclays thinks "fundamental challenges" could burger WEN's earnings.
  • Xerox Holdings (-12%): A 15% workforce slash sent XRX into restructuring mode.


Parsing the Minutes: The Fed's December notes added a dash of cold water to the "rate cut party" hopes. While inflation's retreat is welcome, officials want to see sustained progress before considering easing the brakes. This puts a damper on expectations for multiple cuts this year, with investors now seeing a slightly less generous rate landscape.


Job Openings Drop: The JOLTS report showed a dip in job openings, indicating the Fed's tightening might be working its way through the labor market. While this could soothe inflation concerns, it also raises questions about future growth.


ISM: Mixed Signals: Manufacturing activity ticked up slightly in December, but still remains in contraction territory. This mixed bag adds to the overall uncertainty surrounding the economic outlook.


Eyes on Friday: The December jobs report takes center stage this week, with market watchers looking for clues about the pace of hiring and wage growth. A strong report could reignite inflation worries, while a weaker one could fuel recession fears. Buckle up, it's gonna be a bumpy ride.


Bonus Takeaway: While Walgreens and food processors headline the earnings docket, the real drama could unfold around the Fed's January meeting later this month. Stay tuned for further updates on that front.



Random Musings and the Time Machine


Something to Ponder...


Central Bank Charade: The Fed's minutes were a masterclass in ambiguity, leaving investors deciphering clues like detectives at a high-stakes financial masquerade ball. Will they loosen their grip on rates soon? Only time will tell, and even then, they might just wink and walk away.


Inflation's Lingering Lacerations: Even as inflation retreats, its scars remain etched on consumer confidence. Like a bad sunburn, its effects linger, influencing spending habits and casting a shadow over economic optimism.


Labor Market Waltz: The JOLTS dip might be an early sign of the labor market slowing, but don't call it a victory lap just yet. Economic data loves a good two-step – one step forward, one step back – so buckle up for potential plot twists.


EV Evolution Jitters: BorgWarner's tumble reminds us that the electric vehicle revolution isn't all smooth sailing for traditional auto parts suppliers. Adapting to the new terrain is crucial, or they risk getting left behind in the dust cloud.


Xerox Reshuffle: The company's workforce reduction is a poignant illustration of the digital transformation chess game. As technology rewrites the rules, some pieces are strategically repositioned, while others are inevitably sacrificed for the greater good.



On this day in history, January 4th:


January 4, 1792: Alexander Hamilton throws down the financial gauntlet, establishing the First Bank of the United States. No cryptic minutes back then – Hamilton simply wielded the quill and built the bank, laying the foundation for a prosperous nation.


January 4, 1896: Utah merges with the United States, proving that economic strength can come from combining forces. This strategic union brought a treasure trove of silver and a GDP boost, a historical nugget for modern-day merger enthusiasts.


January 4, 1955: Elvis Presley unleashes his debut single, "That's All Right, Mama." While its immediate economic impact was muted, the King's musical revolution eventually sent shockwaves through society, influencing everything from fashion trends to consumer spending. A long-term investment with epic returns!


January 4, 1976: Apple Computer unveils the Apple I, a bite-sized pioneer that would change the technological landscape forever. This groundbreaking innovation reminds us that sometimes, the most transformative ideas come in the most unassuming packages.


January 4, 2004: NASA's Spirit rover lands on Mars, a testament to the human spirit's unwavering thirst for exploration. Even when markets feel like barren landscapes, this historical feat reminds us that new frontiers and unexpected rewards await those who dare to venture beyond the horizon.



The Final Ledger


The market took a pause today, digesting analyst downgrades like a lukewarm cup of coffee. The Fed's cautious tone in the minutes dampened hopes for a rapid rate-cut salsa, leaving investors wondering if the economic tango would be a slow waltz or a hesitant shuffle. Meanwhile, Friday's jobs data looms like a flashing neon sign, promising either a "green light" for the economy or a "caution tape" warning.


In this uncertain climate, remember this tidbit of wisdom: "The market will fluctuate. But fools will not." 


Until next time, may your portfolios flourish and your market predictions be ever in your favor!


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