Stock Market Today: November 20th - 24th, 2023

Welcome StonkForums to the trading week of November 20th!

This past week saw the following moves in the S&P:


S&P Sectors End of Week:


Major Indices End of Week:


Major Futures Markets End of Week:


Economic Calendar for the Week Ahead:


What to Watch in the Week Ahead:

(N/A.)

 

'Santa Married Goldilocks' - Soft CPI Sparks Big Week Of Buying For Bonds, Stocks, & Gold
FRIDAY, NOV 17, 2023 - 04:00 PM

The 'higher-for-longer' soft landing economy may be transitioning back to a 'Goldilocks' economy of not-too-hot/not-too-cold activity and inflation, that this week, at least, created a particularly attractive backdrop for stocks, but realistically everything just traded together like the 'QE trade' - stock sup, bonds (prices) up, gold up, dollar down...



Source: Bloomberg

In fact, as one traders was overheard commenting on the ease with which the markets shrugged off geopolitical fears, a clearly retracting US consumer, and cracks in the labor market, "it's as if Santa married Goldilocks... everyone's drinking that kool-aid..."

The 'seasonal' ramp arrived right on time...



Source: Goldman Sachs

As Goldman's Chris Hussey noted, the principal concern of a successfully soft landing economy is that growth takes off again, triggers renewed inflation, and the Fed is compelled to respond with more rate hikes. But this week, that scenario began to look less likely as the latest CPI inflation reading dipped, suggesting that the trajectory for inflation remains benign.

Additionally, on the growth side,

• Housing Starts came in stronger than expected;
  
  
• the Philly Fed improved from a month earlier;
  
  
• retail sales declined by less than expected;
  
  
• weekly jobless claims edged up but remain far from any level of pressure; and
  
  
• Congress passed measures to avert a government shutdown.
  

All of which saw the macro surprise index trending down...



Source: Bloomberg

...and at the same time, financial conditions getting dramatically looser...



Source: Bloomberg

This helped lift stocks dramatically higher on the week with most of the majors moving systemically higher (S&P, Nasdaq, Dow all up around 2% on the week - but notice basically unch since the CPI spike). Small Caps (Russell 2000) were big winners on the week amid a major squeeze, up over 5% on the week (it second best week of the year)...



The gains - especially in Small Caps - were helped by a massive short-squeeze. 'Most Shorted' stocks exploded higher on the CPI print but have faded a biut since in a pattern that looks very familiar...



Source: Bloomberg

We do note that the CPI ramp lifted the Russell above its 50DMA and the the follow-thru pushed it up to its 200DMA which acted as resistance and the index faded from there...



Source: Bloomberg

The Magnificent 7 stocks soared this week breaking out of their down-trending range...



Source: Bloomberg

It was a very mixed week for sectors with Energy swinging around. Everything was higher on the week but Real Estate led while Staples were the ugliest horse in the glue factory...



Source: Bloomberg

It will come as no surprise given the extremely high correlation regime we are in...



Source: Bloomberg

...that bonds were also bid this week with TSY yields tumbling around 20bps as the belly outperformed the wings (notice that today saw a big pivot/curve flattener with 2Y+7bps and 30Y -2bps)...



Source: Bloomberg

2Y yields plunged back below 5.00%...



Source: Bloomberg

The dollar plunged on the week (2nd biggest weekly drop of the year), extending Tuesday's losses today, and falling into the red for 2023...



Source: Bloomberg

Bitcoin ended the week lower (by around 2%) after once again testng $38,000 ad failing to hold



Source: Bloomberg

WTI ripped higher today after an ugly week (today was the 5th biggest rally day for crude this year as it tried to get back up to its 200DMA), but could not stop oil being down (albeit only modestly) for the 4th straight week (and closing in a bear market, down over 20% from its recent highs)...



After the ramp, Bloomberg headlined that a 1mm barrel production cut is on the table for next week's meeting. This raises the question - who was front-running that news (and leaked the comment to the FT)?

Gold jumped over 2% higher this week, bouncing perfectly off its 200DMA...



Source: Bloomberg

Finally, could we be heading towards this?



Source: Bloomberg

Squeeze and Seasonals support it, but OpEx gamma unclench could delay the ramp.

 

Trading the Thanksgiving Market – Historical Bullishness Fading


Thanksgiving week has a notorious “holiday fueled” bullish bias as do the last seven trading days of the month. However, as you can see from the tables here of the history of the Thanksgiving trade the bullish bias has weakened over the last several years, most notably on Wednesdays and Fridays.

First published in the 1987 Stock Trader’s Almanac, the Wednesday before and the Friday after Thanksgiving combined were up 34 times in 35 years. The only S&P 500 decline was in 1964. Subsequently, this trend changed. In the 35 years since 1987, there have been 10 declines and 26 advances. See 2024 Stock Trader’s Almanac page 106 for more.

Three Things Every Investor Should Know


“Did you hear the one about the statistician who put his feet in the oven and head in a bucket of water? When asked how he felt he replied, ‘on average, I feel pretty good.’” -Old statistics joke

One of my favorite parts about my job is I get to travel all over the country and talk with our Carson Partners and their clients. I love traveling and seeing the world, but I also love talking with clients and, helping them understand what is really happening out there. There is so much bad info out there, simply designed to get you to click on it. I like to try to show you shouldn’t believe everything you read and there are some things that all investors need to know, but the media doesn’t typically tell us.

My presentations usually discuss our broad market and economic views, with some sprinkled in talk about the Fed, inflation, geopolitical worries, Washington drama, or whatever else is in the news that is scary for investors. But there are three things that I always discuss and I wanted to share them in today’s blog.

There’s No Such Thing as Average
We know that stocks gain about 9% a year going back in time, but the catch is most years are rarely around 9% when all is said and done. Go read the line about the statistician above one more time for a little context on what I’m about to share.

Going all the way back to 1950, we found there were only four years that stocks gained between 8% and 10% on the year! That is amazing, but it shows that average isn’t so average when it comes to investing. Taking things a step further, since 1950 there were 21 years when stocks were down on the year, but 20 years when they were higher by more than 20%! So the odds are nearly the same for an up 20% year as a down year. I do this for a living and every time I hear this I’m still surprised. Average isn’t so average is the first thing investors need to know.



Volatility Is the Toll We Pay to Invest
There is no such thing as a free lunch and that is even more true when it comes to investing. Over the long run stocks will average about 9%, as we discussed above, but the catch is you’ll have every reason under the sun to want to sell along the way.

Think about just three weeks ago. Stocks hit a correction (down 10%) and the bears were out in full force telling anyone who would listen that a major market calamity was right around the corner. Instead, we saw your typical late October low and subsequent strong November rally. If you’ve been reading what we’ve been saying then you know we did our best to ignore the hype and layout why a strong year-end rally was still likely. Well, stocks are up 7% already in November and we are well on our way to a nice year-end rally.

On the Carson Investment Research team, we like to say that volatility is the toll you pay to invest. You can’t get anywhere good without paying some type of toll and longer-term wealth is created with volatility, that’s the toll.

Even though we had a 10% correction recently, you’d think it was about as rare as my Cincinnati Reds winning a World Series the way everyone acted. But it turned out that most years see a 10% correction, so we shouldn’t have been shocked, especially after the best first seven months for the S&P 500 since 1997. Some type of give back would have been perfectly normal and healthy.

Your average year sees 1.1 10% corrections per year, along with 3.4 5% mild corrections and 7.3 3% dips per year. (Thanks to our friends at Ned Davis Research for these important numbers.) Sure, a 10% correction when it happens isn’t fun, but investors need to know they are quite normal.

They say the stock market is the only place things go on sale and everyone runs out of the store screaming. Well, remember this data next time people start running out of the store and you find yourself some good deals.



All About Time in the Market
The third thing all investors need to know is time is your friend. Around here we like to say it is about ‘time in the market, not timing the market’ that matters. This simply means the longer you are willing to hold stocks, the more likely you will have gains.

The S&P 500 is higher 53% of the time on any random day, but that jumps to higher 71% of the time each year. What about holding 10 years? Higher more than 90% of the time. And if you are willing to go out 20 years, the stock market has never been lower. Sure, if you buy right near a major peak it very well could take years to get back to a profit, but the good news is investors aren’t forced to only buy near peaks. So buying when things are lower will likely exponentially enhance your future returns.



Eisenhower said, “Plans are useless, but planning is everything.” I like that and having that plan in place, leveraging these three bits of investment advice, will greatly help over time. There are so many investing lessons I’ve learned over the years, but if you learn these three and apply them, you likely won’t panic the next time someone on TV tells you how bad things are. Instead, you will stick with your plan.

No Bad Sentiment in the Northeast
Thu, Nov 16, 2023

The past couple of weeks have seen some relief in mortgage rates and a rebound in weekly mortgage applications as a result, but that positive housing market development didn't show per the latest reading on homebuilder sentiment. The NAHB's Housing Market Index dropped to 34 in November and is only three points above the low from last December.



In the table below, we show the readings of each sub-index of the report as well as the month-over-month change and how those readings stack up versus history. As shown, the month-over-month declines across the report were historically large with the six-point drop in the headline index ranking in the bottom 2nd percentile of all monthly moves with each sub-index also experiencing bottom 5% moves.



Regional homebuilder sentiment was more peculiar. Again, there were historic declines in the Midwest, West, and South. The Northeast went in the complete opposite direction as sentiment rose by 7 points. Although that does not leave sentiment at a new high, the month-over-month gain ranks in the 87th percentile of all months on record.



Continuing Claims Relentlessly Rise
Thu, Nov 16, 2023

Among a large slate of economic data released this morning, jobless claims disappointed with both initial and continuing claims coming in higher than expected. For initial claims, the seasonally adjusted number rose meaningfully from an upwardly revised 218K last week to 231K. That compares with expectations of a more modest increase to 222K. That brings claims back to the highest level since the week of August 19th, and the 13K week over week rise was the largest since the first week of August.



On a non-seasonally adjusted basis, claims have continued their steady rise as is normal for this time of year. At 215.9K, this week's print was slightly higher than the comparable week last year, but also below those from the several years prior to the pandemic. In other words, claims are deteriorating, but from what are still strong levels.



Continuing claims, on the other hand, keep looking worse every week. Continuing claims have now risen for eight straight weeks, bringing it up to 1.865 million. That surpassed a high from this past April to make for the most elevated reading since November 27, 2021.



As we have noted in recent weeks, the size of the move in continuing claims over the past couple of months has been comparable to the size of increases around prior recessions. The same can be said for the consistency of upward moves in continuing claims. As shown below, the eight straight weeks of higher readings is the largest since the spring of 2020. Prior to that, most streaks of that size or longer occurred in the midst of a recession with the exception of the other two most recent instances in November 2018 and December 2019.



Bad Expectations Out of New York
Wed, Nov 15, 2023

The New York Fed gave us the first regional reading on manufacturing conditions this morning with the release of the Empire State Manufacturing Survey. The headline number rose back into expansion at 9.1, well above expectations of an improvement to only -3. Although the current conditions index improved, expectations dropped a massive 24 points month over month. That ranks as the fourth largest one month decline in this reading on record behind September 2001 and January 2009.



Below we show a breakdown of each category of the report for both current conditions and 6-month expectations indices. Although General Business Conditions improved dramatically, breadth was otherwise negative. Of the other categories, only three rose month over month. Expectations likewise had more categories falling than rising leaving multiple categories at or near the bottom of their respective historical ranges dating back to the start of the survey in 2001.



The report indicated weak demand as new orders currently remain in contraction. Meanwhile, Unfilled Orders are far more depressed at -23.2 making the November reading the lowest since December 2014. Shipments have been increasingly choppy during the post-pandemic period, but the November reading did improve up to 10, slightly below the historical median. Meanwhile, Inventories were much more elevated. Rising 11.2 points month over month, inventories are now in the top decile of their historical range with the first expansionary reading in six months.



Employment metrics were also weak with both the number of employees and average workweek indices sitting in contraction. However, these were also two of the strongest categories relative to historical ranges of anywhere in the report. In fact, Average Workweek expectations hit the highest level since March of last year. While those labor expectations remain healthy, the same cannot be said for capital spending. Expected tech spending hit a new post-pandemic low while capital expenditure plans likewise returned to the low end of its range.



Our Leading Economic Index Still Points to “No Recession”


We publicly started releasing our proprietary leading economic index (LEI) in our 2023 Mid-Year Outlook, which we use to give us an early warning signal about economic turning points. We produce an LEI for the US and 29 other countries, each one custom built to capture the dynamics of those economies. The individual country LEIs are also subsequently rolled up to a global index to give us a picture of the global economy. These were all developed more than a decade ago and form a key input into our asset allocation decisions.

Right now, our LEI for the US points to above-trend, or slightly above-trend, economic growth. Far away from a recession.
Our index includes 20+ components, including consumer-related indicators (which make up 50% of the index), housing activity, business and manufacturing activity, and sentiment and financial markets. This contrasts with other popular LEIs, which are premised on the fact that the manufacturing sector, and business activity/sentiment, is a leading indicator of the economy. This worked well in the past but is probably not indicative of what’s happening in the economy right now.

The LEI captures whether the economy is growing below trend, on trend (a value close to zero), or above trend. It can capture major turning points in the business cycle. For example, it declined ahead of the actual start of the 2001 and 2008 recessions. Last year, the index signaled that the economy was growing below trend, and that the risk of a recession was high. Note that it didn’t signal a recession, just that the “risk” of one was higher than normal. In fact, our LEI held close to the lows we saw in the prior cycle, especially in 2011 and 2016. In both of those cases, growth slowed (but continued) within a larger expansion. Both times the economy, and even the stock market, went on to recover.

Right now, the situation looks better than it did a year ago.



Breaking our leading economic index for the U.S. into underlying components captures how the economy has evolved since the pandemic hit three years ago. In a nutshell, the consumer has driven the recovery and carried the economy through last year. That’s in the face of major headwinds, mostly driven by a very aggressive Federal Reserve (Fed) – which adversely impacted financial conditions and borrowing costs, housing, and business investment and manufacturing. The good news is that with inflation pulling back, we could potentially see the Fed cutting rates, and that means all those headwinds are fading, and could even become tailwinds in 2024.



As we look toward 2024, let’s take a look at the dynamics that may be in play.

Consumption is likely to remain strong on the back of strong balance sheets.
The good news about falling inflation is that it’s a tailwind for household wallets. Stronger inflation-adjusted incomes will likely power consumption going forward, and thus the economy.

As I pointed out above, consumption has driven growth over the last few years, even in the face of an aggressive Fed, which normally would have resulted in a recession. A big factor was that households had a lot of excess savings that built up during the pandemic. A large portion of that was used up during the inflationary period of 2022 and after, though our estimate is that there’s still $500 billion – $1 trillion left. Nevertheless, consumption has been mostly powered by rising incomes and lower savings rates. It’s not surprising that savings rates have fallen relative to pre-pandemic – a big reason is that households are much wealthier now than they were pre-pandemic, thanks to higher home prices and stock prices. At the same time, the ability to lock in low mortgage rates when interest rates were low means debt hasn’t increased as much as household assets have. Household net worth is now 7.5 times disposable income, much higher than the 6.8 times just before the pandemic. And as the chart shows, it’s entirely because asset values have increased, while liabilities have stayed more or less the same. In fact, liabilities as a percent of disposable income are closer to where they were in the late 1990s (~ 100%), and well below 2007 levels of 136%, when households were a lot more leveraged.



Easing rates should boost cyclical activity.
As I wrote in my prior blog, the soft October CPI report has resulted in a pivot of monetary policy rate expectations. There’s good reason to think inflation is headed lower in a sustainable way, and that means the Fed could potentially make a few rate cuts in 2024, perhaps as early as spring. That’s going to ease borrowing costs.

The immediate beneficiary of lower borrowing costs will be residential investment. We got a preview in 2023 – housing activity, especially on the single-family side (which makes up the largest part of residential investment), picked up as mortgage rates eased early in the year. Things cooled down as mortgage rates surged above 8% in the fall, but we could once again see starts and new home sales pick up as rate ease once again.

It’s very unlikely mortgage rates pull back to the low levels of 2021, but even moving toward 6% could unlock a lot of activity, especially since there’s a lot of pent-up demand. The largest age cohort in America are 25-34 year olds (millennials), and that’s prime home-buying years, which is why housing activity in the new homes market hasn’t collapsed despite higher rates. Single-family starts are up 9% year over year, while new home sales are up 34% year over year. High rates have locked in existing homeowners who don’t want to sell and buy a new home with a higher mortgage. So potential home buyers are looking to the new homes market. Most importantly, new homes contribute more to economic growth because of design, construction, and engineering, in addition to brokers commissions and other transaction costs (which apply to existing homes as well).



The other beneficiary of lower rates will be businesses, especially small businesses who tend to borrow more floating rate debt. That’s going to potentially improve the investment outlook and increase business activity. Business sentiment has been poor for the last couple of years, especially on the manufacturing side. This is despite hard data telling us that manufacturing production increased in 2023 and is running above pre-pandemic levels. A better financing picture will likely improve investment sentiment.

All this is likely to come on top of resurging manufacturing construction activity – which has risen 94% since the end of 2020, after adjusting for inflation. Construction of facilities that manufacture computers, electronic, and electrical equipment, i.e. semiconductor and electric vehicle battery plants, have surged a whopping 900% over the same period. The inflection point came after mid-2022, on the back of the CHIPS and Science Act and the Inflation Reduction Act, which pushed grants and subsidies into reshoring manufacturing facilities. Only a portion of the money authorized by Congress has been released by the Department of Energy, and so there’s plenty more to come. Not to mention additional funds authorized as part of the bipartisan Infrastructure Investment and Jobs Act.



All said and done, the economy looks nicely positioned as we head into 2024, with continued consumer strength and the massive headwind of Fed policy potentially turning into a tailwind, which is why we believe the probability of a recession in 2024 is low, perhaps only around 25%.

Small Businesses Start to Worry About Rates
Tue, Nov 14, 2023

In an earlier post, we discussed the latest small business survey from the NFIB. Another aspect of the survey is to question businesses on what is currently their most important problem. As shown in the table below, by far the most common response is either cost or quality of labor accounting for a combined 32% of responses. That is despite the apparent slowdown in labor markets as we discussed in today's Morning Lineup. Another 22% of responses point to government-related concerns like taxes (13%) and government red tape (9%). Combined, that is tied with inflation for the second most pressing issue among small businesses.



While it makes up a vastly smaller share of responses at only 5%, financial & interest rates have seen their share rise significantly. At 5%, it is the highest reading since 2010.



Furthermore, of firms reporting a negative outlook for expansion, rates rank as the second most common reason for said outlook behind political climate. While political climate holds a higher share of responses, it is worth noting that the reading has historically held a strong correlation with which party is in office (tending to favor Republicans). As shown below, after the 2016 election when Trump was elected to office, the readings tanked whereas leading up to and in the wake of the 2020 election of President Biden the reading rose sharply. Since then it has moderated, but it still remains the main reason cited by small businesses for their negative outlook.



Finally, we would note that although the October report saw a massive drop off in actual sales, few businesses appear to be overwhelmingly concerned with the issue. Only 5% of responses credited poor sales as their biggest problem. That is unchanged for five months in a row as it was higher as recently as the summer of 2021.



Small Business Sales Get Slammed
Tue, Nov 14, 2023

This morning's release of small business sentiment from the NFIB showed optimism fell by less than expected, coming in at 90.7. That compares to 90.8 in September and leaves the index in the middle of the past several months' range. Although that is not at a new low, current levels are near the lowe end of the post-pandemic recession range.



Business outlook was unchanged at a historically low -43, albeit that is off the lows from June of last year. As small businesses remain pessimistic in their evaluation of the economy, there has been a significant deterioration in sales. Although sales expectations have risen, observed sales changes are down to -17 which outside of April through July 2020 is the weakest reading since September 2010. That has resulted in actual earnings changes also deteriorating with current levels very close to post-pandemic lows. In terms of prices, the index of higher realized prices ticked up to 30.



When surveyed on the most important reason for lower expected earnings, the highest share of respondents reported increased costs as the culprit. Granted, that combines input costs with increases in other aspects like taxes and finances (i.e. interest rates). While moving higher, the share reporting increased costs as their biggest reason for lower earnings is still below levels from last fall. On the other hand, the share reporting sales volumes as the reason has been rising steadily to levels not seen since May 2021.



In the table below, we show all categories of the report as well as their month-over-month change and how those readings rank as percentiles of all months in the survey's history. The headline number's further decline, albeit marginal, still leaves it in the bottom decile of historical readings. The bulk of the drop was thanks to the deterioration in actual earnings changes, but otherwise, breadth wasn't too bad for the index's inputs. That being said, the month-over-month drop in earnings changes does rank in the bottom 2% of all months on record, and other non-inputs to the headline number were more mixed. Again, actual sales changes were notably weak and, like actual earnings changes, recorded a historic month-over-month decile. That also applied to credit conditions for regular borrowers as interest rates remain elevated.



Here’s Why We Think This Inflation Report Will Set Up Serious Rate Cut Expectations


The October Consumer Price Index (CPI) report was chockful of good news. Headline inflation was flat in October, below expectations for a 0.1% increase. The October “surprise” came on the back of lower gasoline prices, which fell 5%. But that counts, and even more so because it means households have more income – keeping consumption and the economy humming. Headline inflation has pulled back from 9% year over year in June 2022 to 3.2% in October. The big decline came on the back of lower energy prices, but as you can see below, all the other bars are shrinking too.



The Federal Reserve (Fed) prefers to look at inflation stripped of food and energy (since these are volatile). “Core” inflation rose just 0.2% in October, translating to a 2.8% annualized pace. Over the last 6 months, core CPI has run at a 3.2% annualized pace – well below peak levels of 6-7% we were staring at a year ago and getting ever so close to the Fed’s 2% target. Core CPI was averaging about 2.3% before the pandemic.



The good news from the October CPI report is that we’re seeing broad disinflation. And there’s more to come. This is why this report will likely put an end to any further rate hike expectations and could go even beyond that – expectations for rate cuts in the first six months of 2024 will increase.

Let’s look at the three big key pieces that matter.

Prices for core goods, excluding food and energy, have been falling for five months in a row now, and are down almost 1% over the last six months (annualized). A lot of this is because of supply-chain healing, and we expect there’s more to come over the next several months, especially as auto production continues to ramp up and inventories increase, which will push vehicle prices lower.

Housing disinflation has been on the cards for a while now, with falling market rents indicating that official data will follow. We got a brief spike in September, but the downtrend resumed in October, with housing inflation running at close to a 5% annualized pace – the slowest pace since December 2021. We’re likely to see more disinflation, as private market data indicates that rents continue to fall.



Then we have core services excluding housing, which is worth a deeper look as it matters a lot for how the Fed thinks about inflation, the labor market, and the economy.

The “Last Mile” of Inflation
Fed Chair Jerome Powell recently said that the decline in inflation over the past year is welcome. We’ve yet to get October data for the Fed’s preferred metric, which is the Personal Consumption Expenditures Index (PCE), but core PCE has declined from 5.5% a year ago to 3.7% as of September. However, Powell wants to see more evidence of disinflation.

Powell noted that the big pullback in inflation has come about due to the improvement in supply chains. For core inflation to decline from above 3.5% to the Fed’s target of 2%, he believes we will need to see demand moderate, which basically means the economy must slow down to below trend. The unemployment rate may also have to go up a bit. He doesn’t think there needs to be a recession, but that a slowdown is required to get through the “last mile” of inflation.

The Fed has talked about “core services excluding housing” inflation being key to get inflation back to target, which they believe is dependent on the employment situation. For example, restaurant and bar sales, hotel accommodations, live entertainment, dry cleaning, air travel, etc. could perhaps be impacted by labor market dynamics, i.e. a strong labor market results in higher incomes, which could push demand for these services up, and send prices higher.

The good news is that we’re seeing disinflation even in these “core services ex housing” categories. That’s happened even as the economy has accelerated above trend the past year and the unemployment rate has remained under 4%. I looked at all the items that make up “core services ex housing” – there are about 105 of them in the PCE data – and calculated the distribution of year-over-year price increases for all of them in 3 periods:

• December 2019; before the pandemic
• September 2023; a year ago, and near peak inflation
• September 2023; the most recent data

The chart below shows how the distribution has evolved. You’ll immediately notice that inflation really broadened out for these items by September 2022. In fact, 31% of these items saw inflation rates of above 7%.



The good news is that things have pulled back over the last year, and there’s movement towards where we were before the pandemic. Only 17% of the items are running above 7% inflation. This means there’s some ways to go to get to where we were pre-pandemic, but the movement is a positive sign.

We believe this is evidence that a significant slowdown of economic growth may not be necessary to get core inflation moving towards the Fed’s target. Combine that with the fact that we’re seeing housing inflation ease, in line with private market data, and all signs point to inflation easing in 2024. As a result, the Fed does not have to raise rates again, and in fact, by Spring of 2024, they could even start thinking about rate cuts. If inflation is on a sustainable path lower, there’s no need to keep policy rates as restrictive as they are, especially when there’s a risk of breaking the economy, and Powell’s recent comments suggest they’re increasingly unwilling to do that.

Open Season for Small Caps

A Soft CPI reading this morning and a nice pop in the Russell 2000 Small Cap Index today remind us that seasonally speaking, small caps are set up for their annual yearend rally into Q1, often referred to as the “January Effect,” where small caps outperform large caps in January.

Small caps have been struggling for two years now, hurt by non-transitory high inflation, the most aggressive rate-hiking regime we’ve seen since the 1980s, geopolitical turmoil with war on two fronts, fallout from pandemic and post-pandemic economic and labor woes. And the Russell 2000 small cap index recently hit a new multi-year low at the end of October.

As we point out on pages 112 and 114 of the Stock Trader’s Almanac, most of the “January Effect’s” small cap outperformance takes place in the last half of December when tax-loss selling abates. Our annual November stock basket published last week for members contains some brand-new, undervalued, off-Wall-Street’s-radar small cap picks.

As you can see in the accompanying chart the R2K has been tracking the pattern quite well since July and it looks like the small fry are coming out of hibernation just in time for small cap stock hunting season. Small cap stocks are facing several obstacles mentioned above, but they rallied strongly off the October 27 low with the rest of the market.

As illustrated in the chart, small caps exhibit some chop from late-October through mid-December. Our small cap stock picks have historically done well as long as you honor the buy limits and stop losses. Last pre-election year in 2019 R2K had a nice rally from October to January before it was crushed by the pandemic.

Three Decades and Nothing to Show For It
Mon, Nov 13, 2023

In the currency markets this morning, the big story is the Japanese yen falling to a new low. At the current level of 151.90, a dollar now buys more yen than it has at any point since June 29, 1990. That's not a typo. 1990! From 1990 to October 2011, the yen rallied to as low as 75 yen per dollar, but over the course of the last 12 years, it has lost half of its value, and a dollar now buys twice as many yen as it did then. 34 years and nothing to show for it.



Like the yen, Japan's Nikkei 225 has also had a roller coaster move in the last 34 years. After losing more than 80% from its December 1989 high to its October 2008 low, Japan's benchmark equity index has rallied more than 350%, taking it to levels that before this summer, it hadn't traded at since July 1990. Again, Japan's equity market has had its ups and downs over the last 34 years, but after all the time and effort, besides dividends, the Nikkei has nothing to show for it. Rip Van Winkle only fell asleep for 20 years, but if a Japanese investor fell asleep 34 years ago and woke up today, they may look at the paper and not even notice.



The Rise of the Mega-Caps
Mon, Nov 13, 2023

In our latest Bespoke Report newsletter sent to subscribers last Friday, we provided a helpful illustration on the rise of the "mega-caps" over the last decade or so. Below is a look at the market caps of the 25 largest S&P 500 stocks ten years ago versus today. Take a close look. The 25 largest stocks in the S&P 500 now make up nearly 50% of the index versus just over a third ten years ago. Back in November 2013, the three biggest stocks all had weightings below 3%, while four stocks now have weightings above 3.75%, including Apple at 7.3% and Microsoft at 6.9%! Apple, Microsoft, Alphabet, and Amazon had a combined market cap of about $1.3 trillion ten years ago. Now each is larger than that combined number! As you also might notice, stocks 8 through 25 on the current list have weightings relatively close to their weightings from ten years ago, so it’s really just the biggest of the big stocks that have ballooned. This also tells you that virtually all the market’s gains in the last decade have come from these handful of stocks, so if you haven’t owned either these stocks or “the market,” you’ve likely lagged “the market” badly.



Below is a graphical representation of the market caps for every stock in the S&P 500 today versus ten years ago, sorted from the smallest stock in the index on the left to the largest stock in the index on the right. Look at that parabolic rise of the mega-caps!

 

Here are the percentage changes for the major indices for WTD, MTD, QTD & YTD in 2023-



S&P sectors for the past week-

 

Here are the current major indices pullback/correction levels from 52WK highs as of week ending 11.17.23-


Here is also the pullback/correction levels from current prices-


Here are the current major indices rally levels from 52WK lows as of week ending 11.17.23-

 

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Here are the upcoming IPO's for this week-

 

Stock Market Analysis Video for November 17th, 2023
Video from AlphaTrends Brian Shannon


ShadowTrader Video Weekly 11/19/23
Video from ShadowTrader Peter Reznicek
(VIDEO NOT YET POSTED.)

 

StonkForumers! Come join us on our stock market competitions for this upcoming trading week ahead!-

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StonkForums Weekly Stock Picking Contest & SPX Sentiment Poll (11/20-11/24) <-- click there to cast your weekly market direction vote and stock picks for this coming week ahead!

Daily SPX Sentiment Poll for Monday (11/20) <-- click there to cast your daily market direction vote for this coming Monday ahead!

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It would be pretty sweet to see some of you join us and participate on these!

I hope you all have a fantastic weekend ahead!

 

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Here are the most anticipated Earnings Releases for this upcoming trading week ahead.

***Check mark next to the stock symbols denotes confirmed earnings release date & time***

Monday 11.20.23 Before Market Open:

Spoiler: CLICK HERE TO VIEW MONDAY'S AM EARNINGS TIMES & ESTIMATES!

Monday 11.20.23 After Market Close:

Spoiler: CLICK HERE TO VIEW MONDAY'S PM EARNINGS TIMES & ESTIMATES!

Tuesday 11.21.23 Before Market Open:

Spoiler: CLICK HERE TO VIEW TUESDAY'S AM EARNINGS TIMES & ESTIMATES!

Tuesday 11.21.23 After Market Close:

Spoiler: CLICK HERE TO VIEW TUESDAY'S PM EARNINGS TIMES & ESTIMATES!

Wednesday 11.22.23 Before Market Open:

Spoiler: CLICK HERE TO VIEW WEDNESDAY'S AM EARNINGS TIMES & ESTIMATES!

Wednesday 11.22.23 After Market Close:

Spoiler: CLICK HERE TO VIEW WEDNESDAY'S PM EARNINGS TIMES & ESTIMATES!

Thursday 11.23.23 Before Market Open:

Spoiler: CLICK HERE TO VIEW THURSDAY'S AM EARNINGS TIMES & ESTIMATES!

(NONE. U.S. MARKETS CLOSED IN OBSERVANCE OF THANKSGIVING DAY.)

Thursday 11.23.23 After Market Close:

Spoiler: CLICK HERE TO VIEW THURSDAY'S PM EARNINGS TIMES & ESTIMATES!

(NONE. U.S. MARKETS CLOSED IN OBSERVANCE OF THANKSGIVING DAY.)

Friday 11.24.23 Before Market Open:

Spoiler: CLICK HERE TO VIEW FRIDAY'S AM EARNINGS TIMES & ESTIMATES!

Friday 11.24.23 After Market Close:

Spoiler: CLICK HERE TO VIEW FRIDAY'S PM EARNINGS TIMES & ESTIMATES!

(NONE.)

 

And finally here is the most anticipated earnings calendar for this upcoming trading week ahead-
($NVDA $ZM $A $SYM $KSS $MDT $HPQ $LOW $ADSK $TCOM $BBY $DE $BIDU $ANF $KEYS $NIU $FUTU $DKS $BURL $JWN $DLO $URBN $JACK $AEO $ADI $GBDC $YMM $TDCX $LEGN $J $SOL $BRBR $BLRX $CAL $GES $HIBB $IQ $GOGL $FIHL $GDS $PGRU $TRMR $API $BZUN $ENLT $ENTA $CENT $ARQQ $NTIC $XELB (since most are on Tuesday, not all listed above are shown))


If you guys want to view the full earnings post please see this thread here-

• Most Anticipated Earnings Releases for the week beginning November 20th, 2023 <-- click there to view!

 

REMINDER: U.S. MARKETS ARE CLOSED ON THURSDAY, NOVEMBER 23RD, 2023 IN OBSERVANCE OF THANKSGIVING DAY AND HAVE AN EARLY CLOSING AT 1PM EASTERN TIME ON FRIDAY, NOVEMBER 24TH, 2023.

 

Top of the morning StonkForumers! Happy Monday to all of you and welcome to the new trading week and a frrrrrrrrrrrresh start. Here is a quick check on those futures as we are a little over an hour from the US cash market open.

GLTA on this Monday, November the 20th, 2023!

 

have a great holiday-shortened trading week this week guys! will catch up with y'all's next week. happy thanksgiving to all!!

 

Morning Lineup - 11/20/23 - Thankful for a Quiet Week?
Mon, Nov 20, 2023

It’s been just over three weeks now that US equities have been in rally mode as we head into a holiday-shortened trading week. Markets are closed on Thursday for Thanksgiving, and Friday is a shortened session with stocks closing for the week at 1 PM on a day. With just three and a half days of trading, the economic calendar is very light, although the earnings calendar will be relatively busy on Tuesday with several retailers, as well as NVIDIA (NVDA), reporting results. Even Fed officials, who seem to love getting in front of a microphone nowadays, are mostly taking the week off.

Over the course of the three-week rally for US stocks, the S&P 500 has been positive all three weeks, and its total gain during that span has been just under 10%. Rallies of this magnitude in a three-week span aren’t unprecedented, but they aren’t common. Prior to the current surge in stocks, the last time the S&P 500 rallied more over a three-week span was back in June 2020.



While the S&P 500’s rally has been impressive, the Nasdaq has rallied even more with its gain of 11.7%. Like the S&P 500, the last time the Nasdaq rallied by a larger amount in a three-week span was back in April 2020, although there were two times in 2022 (April and August) when it rallied by more than 10% over a three-week period.

 

Here is a final look at today's market and futures maps, as well as how each sector performed individually at the close on Monday, November 20th, 2023.

 

Top of the morning StonkForumers! Happy Tuesday to all of you and welcome to the new trading day and a frrrrrrrrrrrresh start. Here is a quick check on those futures as we are a little over an hour into the US cash market open.

GLTA on this Tuesday, November the 21st, 2023!

 

Morning Lineup - 11/21/23 - Thankful for Lower Gas Prices
Tue, Nov 21, 2023

Outside of a number of retail-related earnings reports with some mixed results, it's been a quiet morning so far with little in the way of earnings results. The only major report on the calendar today is Existing Home Sales at 10 AM, and that will be followed by the minutes from the latest FOMC meeting at 2 PM. Perhaps the most notable event for today (and the rest of the week for that matter) is NVIDIA's (NVDA) earnings report after the close.

If you’re one of the millions of Americans traveling by car this weekend, filling up the car has become a lot less painful than it was in the summer. Since Labor Day, the national average price of a gallon of gas has cratered for a total decline of just over 15% through yesterday, and that includes 54 straight days of declines since 9/28. After being up by more than 20% on a YTD basis back in mid-September, average gas prices throughout the country are now up less than 3%. Now, that’s something to be thankful for!



While prices are down sharply since Labor Day, the 13.5% decline isn’t unprecedented. As shown in the chart below, it’s typical for prices to fall at this time of year. Since 2004, the national average price has only risen between Labor Day and Thanksgiving six times, and the average change has been a decline of 8.3%. This year’s decline though is the largest since 2015 and ranks as the sixth-largest decline during this period of the last 20 years.