Big Earnings Week
Stocks continued their march higher this past week as the Dow and S&P 500 touched all-time highs with implied volatility levels dropping to levels last seen over the summer. Although Nasdaq did not move to new highs, it still closed well above its 50-day moving average like the other two.
This week is a huge one as far as big-name stocks expected to announce earnings ( Apple, Amazon, Alphabet, Microsoft and FB) . Clearly the results could keep this bullish train running higher or derail it in a big way. In addition, there are some economic reports due out this week, including several housing reports and the latest GDP figure.
Oct 28: Jobless Claims
Oct 28: GDP
Oct 28: Pending Home Sales
Oct 29: Personal Income and Spending
SPX at new all-time high
In figure 1, the resistance line (horizontal blue line) at the highs is rather wide hence there is still a chance that $SPX is merely at the top of a trading range that extends roughly from 4300 to current levels, at 4550. A clear breakout above 4560 would be strong bullish signal. One thing to notice is that there are so many gaps on the $SPX chart (three in last week) . Gaps like this are often filled. If they are to be filled soon, then the trading range scenario would make some sense. Of course, not all gaps are filled. Look at two circles on the chart in Figure 1 – these GAPs were not filled, even though they occurred months ago – in April and May. The point is that we should stick with indicators and not rely on gaps being closed.
Put-call ratio
The equity-only put-call ratios have reversed course over the past week and have generated buy signals.
VIX structure
The construct of volatility derivatives is bullish for stocks, as well.
The Nov $VIX futures are now the front month, and they are trading with a considerable premium over $VIX and they are trading well below the price of Dec $VIX futures.
The term structures of the $VIX futures and of the CBOE Volatility Indices continue to slope upwards. Those are all bullish signs for stocks
Earnings week
– FANNG stocks reporting this week. Guidance from these will dictate how they trade post-earnigs.
– Interest rates continued to climb last week – a break about 1.8% will be significant if it happens. On a weekly basis we are in an uptrend.
– The US dollar was down Monday then spent the rest of the week chopping in a range.
Sectors in Play
• Energy continues to be near its highs and could be consolidating before continuing higher..
• Gold and silver had an good week – started a position.
• Financials are really doing well in this rising interest rate scenario and after earnings.
What to Watch
• For the coming week, as usual keep a close eye on the 10 yr treasury yield – a continued rise will likely put some downward pressure on the QQQ.
• Even more important will be the raft of earnings reports this week and comments on guidance from some of these big name companies.
• Possible US dollar weakness for rally in metals to continue.
Watching:
AAPL – $150 level is resistance again. Apple reporting Thursday 10/28 after market close – will watch for a trade after the report and depending on reaction .
FB – Reported on 10/25 Mon. $300 is significant area of support as it already dropped 5% post earnings .
GS – if it gets to previous high of $415 could be a good short for rejection at that level.
PYPL – $235 could be support. PayPal tanked hard from $271 to $242 due to possible PINS takeover. It’s not happening after talks with shareholders. Earnings report Nov 8
TSLA – “Hertz Orders 100,000 TSLA model 3 cars for rental fleet” – this news boosts Tesla Value to $1 Trillion ; TSLA almost at $1095 but pretty extended at this level. Possible bear-call spread after $1100
NVDA – The $228 level looks like decent resistance for the stock. A surge and hold above that level could trigger some potential bull call spreads.
Crypto –
COIN – reports on 11/10 ; Watch for pullback post-earnings ; Big Support at $225