February 7, 2024

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Greetings, Trendsters! You are reading Traders on Trend, the newsletter that brings you the latest and greatest in the market world. Today, we have a lot of exciting topics to share with you, so let’s dive right in.

First, we have an opinion piece on the Super Bowl effect, a phenomenon that claims to forecast the market’s direction based on the winner of the big game. Is this indicator a reliable tool or a mere coincidence? Find out what our expert thinks about this intriguing topic.

Next, we have our chart of the day, featuring Palantir, a data analytics company that has been on a rising trend since last August. The stock has been following a channel-up pattern, indicating a steady uptrend with higher highs and higher lows. The chart suggests that Palantir could be starting a new multi-month rally to $45, a level not seen since its IPO in September 2020. What are the drivers and hurdles for this potential breakout? We’ll explain everything in our detailed analysis.

Today, we’ll also talk about how stocks ended little changed amid earnings and Fed watch, what to expect from the upcoming speeches by Fed governors, and which major companies are reporting their quarterly results. We’ll also give you some tips on how to position yourself for the market’s next move, based on the current trends and indicators.

Keep reading below for more market insights, and don’t forget to check out our fun and random trivia section at the end of the newsletter. You might learn something new and surprising. Happy trading! 😊

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Today's Market Mood: EXTREMELY BULLISH!

The Bear-Bull Meter

Today, we’ll look at how stocks ended little changed amid earnings and Fed watch, what to watch out for in the upcoming Fed speeches, and which companies are reporting their earnings. We’ll also share some insights and tips on how to navigate the market’s current situation and prepare for the future.

Stocks were mostly flat on Tuesday, as investors digested a slew of earnings reports from major companies and awaited more guidance from the Fed on interest rates. The market seemed to be in a holding pattern, as it weighed the positive earnings results against the rising bond yields and the uncertainty over the Fed’s policy stance.

The Fed will be in focus again on Wednesday, as two Fed governors, Adriana Kugler and Michelle Bowman, are expected to speak at separate events. Investors will be looking for any hints or signals on the Fed’s outlook and plans for monetary policy, especially after Fed Chair Jerome Powell said on “60 Minutes” that he was wary of “moving too soon” on rate cuts.

Among the companies that reported earnings on Tuesday, Ford Motor (F) beat expectations on both revenue and earnings, thanks to strong demand for its trucks and SUVs. The company also raised its guidance for the full year, citing improved operating conditions and lower costs. Ford shares rose 2.4% in after-hours trading.

Here’s how the major indexes closed on Tuesday:

The S&P 500 index (SPX) edged up 0.2% to 4,954.23, a new record high.

The Dow Jones Industrial Average (DJI) rose 0.4% to 38,521.36, also a new record high.

The Nasdaq Composite index (COMP) gained 0.1% to 15,609.00, slightly below its record high.

The bond market was slightly calmer on Tuesday, as the 10-year Treasury yield (TNX) fell about 7 basis points to 4.089%, after surging to a one-year high of 4.16% on Monday.

Some sectors performed better than others on Tuesday, with transportation and energy leading the way. Transportation shares were boosted by United Parcel Service (UPS), which soared 4.8% after an analyst upgraded the stock, citing its strong earnings and cash flow. The Dow Jones Transportation Average (DJT) rose 2.1% to its highest level since late December.

Energy shares also advanced, as oil prices rebounded from a two-week low. WTI Crude Oil futures (/CL) rose 1% to $54.77 per barrel, as traders shrugged off concerns about oversupply and focused on the prospects of higher demand as the global economy recovers from the pandemic.

So, what does all this mean for you, Trendsters? How should you approach the market in these uncertain times? 

Don’t get too complacent or overconfident. The market may be hitting new highs, but that doesn’t mean it can’t pull back or correct at any time. Be prepared for some volatility and surprises, and don’t chase the market blindly. Have a plan and stick to it, and don’t let your emotions get the best of you.

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Did you know that the Super Bowl winner can ( allegedly) predict the stock market's performance? Apparently, if the team from the AFC wins, the market goes up. Conversely, an NFC victory signals a downturn.

But before you adjust your portfolio based on the halftime score, consider this: the Super Bowl indicator has about as much accuracy as a squirrel throwing darts. ️ In fact, it's been wrong more often than right in recent years.

So, while it's fun to ponder the mystical connection between pigskins and portfolios, remember: sound financial decisions are based on research, analysis, and some dose of skepticism.

So, let the games (and the market) unfold without getting caught in the fumble of this quirky prediction.  Remember, true investment wins come from calculated moves, not lucky throws.

$PLTR: Palantir to Soar Like a Dragon?

Forget the crystal ball, gaze into the "Chart of the Day" instead! Here, Palantir (PLTR) paints a bullish picture, hinting at a multi-month rally that could make even Smaug jealous.

Palantir (PLTR) has been following a long-term Channel Up pattern since the August 05 2022 High. The stock recently broke out of a consolidation phase between the 1D MA50 (blue trend-line) and the 1D MA200 (orange trend-line), confirming the strength of the uptrend. The 1D RSI also broke above its Lower Highs trend-line, signaling a bullish momentum. This breakout should trigger a multi-month rally similar to the one that began on the May 04 2023 Low.

We have three Targets to aim for in the next months:

a) $24.50, which is a +58.90% increase from the current price, matching the peak on November 21 2023. b) $37.00, which is a +136.51% increase from the current price, matching the peak on June 07 2023. c) $45.00, which is a +243.33% increase from the current price, matching the peak on August 01 2023.

The last two targets would require the stock to break the original (blue) Channel Up and enter a more aggressive (dotted) one.

Remember, even the bravest dragons need a healthy dose of caution. Just look at some of Daenerys’ Dragons on Game of Thrones. 

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While the Super Bowl is a cultural phenomenon, its ability to predict the stock market's fate is about as reliable as a coin toss. This year, the " Super Bowl indicator" suggests an NFC win (hello, San Francisco 49ers!) bodes well for markets, while an AFC victory (go Chiefs!) signals a potential downturn. Sounds simple, right?

Think again. This indicator, while boasting a decent track record before the dot-com boom, has stumbled recently, missing the mark in 6 of the past 7 years. So, why do we even humor it?

Some see it as a harmless bit of fun, a chance to don their team colors and make a friendly market prediction. But for serious investors, relying on the gridiron for financial guidance is like navigating by the stars on a cloudy night – you might get lucky, but the odds are stacked against you.

The Super Bowl indicator was first introduced by Leonard Koppett, a sportswriter for The New York Times, in 1978. He noticed that the indicator had never been wrong until then, and he wrote an article about it in the Sporting News. However, since then, the indicator has lost its accuracy and validity, especially in the past decade. From 2004 to 2023, the indicator was correct only 6 times out of 20, a success rate of 30%.

Last year, the Kansas City Chiefs (AFC) beat the Philadelphia Eagles (NFC) in a tight Super Bowl that broke the 2015 world record with over 115 million viewers. According to the indicator, this should have led to a market decline in 2023, but the opposite happened. The S&P 500 index (SPX) rose 11.42 points (0.2%) to 4,954.23 on Tuesday, a new record high.

This year, the Chiefs are back in the Super Bowl, facing the San Francisco 49ers (NFC). For those who still believe in the indicator, the hope is that the 49ers win, as this would signal a market rise in 2024. However, this is nothing more than wishful thinking, as the indicator has no predictive power or relevance for the market.

The market is driven by many factors, such as economic growth, corporate earnings, consumer confidence, interest rates, inflation, and geopolitical events. The outcome of the Super Bowl has nothing to do with any of these factors, and it should not influence your investment decisions. The indicator is a fun and harmless way to make a friendly bet or a conversation starter, but it should not be taken seriously as a reliable tool for forecasting the market.

Let’s dive into analyst ratings, quarterly results, and other tidbits that sent stocks soaring and sinking.

Winners' Circle:

• BP (BP): Up 6% after boosting dividends and accelerating buybacks, proving oil can still be king.
• DuPont (DD): Gained 7.4% thanks to strong earnings, a dividend hike, and a share buyback announcement – a chemical cocktail for success.
• Eli Lilly (LLY): Rose 7.5% after exceeding analyst expectations with its Q4 results, fueled by their weight loss drug Zepbound. Seems losing weight can be good for more than just your waistline.
• Palantir (PLTR): Rallied a whopping 31% after exceeding revenue expectations – proof that even data-driven companies can defy gravity.
• Spotify (SPOT): Jumped 4% on strong subscriber growth, proving music still has the power to move markets (and emotions).

Losers' Lounge:

• DocuSign (DOCU): Lost 1.6% after announcing layoffs, reminding us that even the digital signature world isn't immune to economic chills.
• UBS (UBS): Dipped 5% after reporting a second straight quarterly loss, proving even Swiss banks can have rough patches.

Earnings Watch:

• All eyes on Disney (DIS) today, hoping their earnings magic can continue after a lackluster year. Can they overcome their debt burden and revive their TV networks?
• Other big names reporting include Ali Baba (BABA), CVS (CVS), Uber (UBER), and Yum Brands (YUM) – a diverse buffet of earnings to keep investors busy.

Fed Focus:

The Fed remains the main course, with rate cuts still on the menu but pushed further back. Expect hawkish voices from Fed officials this week, potentially dampening hopes for an early rate cut.

Extras:

• The economy shows resilience despite high rates, with stronger-than-expected readings on the services sector.
• Jobless claims are expected to drop slightly, but rising interest rates are still tightening the screws on some industries, like residential real estate.

Random Musings

If the Super Bowl indicator is true, then the market should be happy that the 49ers won the big game. But what if the market is a Chiefs fan?

Palantir is named after the seeing stones in The Lord of the Rings. Does that mean the company can see the future of the market? Or does it mean the company is secretly controlled by Sauron?

The Fed is often compared to a pilot who controls the plane of the economy. But what if the Fed is actually a passenger who pretends to be a pilot and hopes that the plane will fly itself?

Disney is known for its magic and fairy tales. But can the company make its debt and troubles disappear with a wave of a wand? Or does it need a fairy godmother to help it out?

Uber is a popular ride-hailing and delivery service. But does the company deliver profits to its shareholders? Or does it just deliver losses and headaches?

On this day in history, February 7

1795, the 11th Amendment to the U.S. Constitution was ratified, limiting the jurisdiction of the federal courts over lawsuits against states by citizens of other states or foreign countries.

1812, the most powerful earthquake in U.S. history struck the Mississippi River Valley, causing the river to flow backwards and creating Reelfoot Lake in Tennessee. The earthquake measured 8.0 on the Richter scale and was felt as far away as Canada and the Caribbean.

1904, the Great Baltimore Fire destroyed over 1,500 buildings and caused an estimated $150 million in damages. The fire was caused by a faulty cigar lighter in a dry goods warehouse and was fueled by high winds and wooden structures. The fire was finally contained after two days, with the help of firefighters from other cities.

1964, The Beatles arrived in New York City for their first visit to the U.S., greeted by thousands of screaming fans. The Beatles performed on The Ed Sullivan Show two days later, marking the beginning of the British Invasion and the Beatlemania craze in America.

1984, astronaut Bruce McCandless became the first person to perform an untethered spacewalk, using a jetpack called the Manned Maneuvering Unit. McCandless flew about 320 feet away from the space shuttle Challenger, testing the device’s capabilities and safety.

So, there you have it, folks – a whirlwind tour of earnings, economic whispers, and the ever-present (and sometimes perplexing) Fed dance. Remember, the market may have its ups and downs, but like a good mystery novel, the key is to pay attention to the clues, diversify your suspects (investments, that is), and trust your gut (backed by some solid research, of course).

As the great investor Benjamin Graham once said, "The market is a pendulum that swings between optimism which ignores reality and pessimism which ignores possibility." Don't get caught swinging from the rafters – stay informed, stay diversified, and remember, even the most complex financial equation boils down to a simple truth: invest wisely, and let time be your ally.

Now, go forth and conquer the market (metaphorically, of course). And hey, if you need a break, there's always the Super Bowl... just don't base your investment decisions on the outcome (unless you're betting on popcorn sales, that might be a safe bet).

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