Stock Market Today: October 16th - 20th, 2023

Welcome StonkForums to the trading week of October 16th!

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.)

 

Israel & Inflation Spark Big Week For Bonds, Bullion, & Black Gold
FRIDAY, OCT 13, 2023 - 04:00 PM

JPM's boss summed shit up succinctly:

“This may be the most dangerous time the world has seen in decades,” Jamie Dimon said in a statement accompanying the bank’s quarterly earnings, warning of “far-reaching impacts on energy and food markets, global trade and geopolitical relationships.”



...and it was a short-week for bonds to deal with all this.

• Good: Earnings (this morning, results from JPM, WFC, Citi, and UNH are all being taken positively)
  
  
• Bad: Inflation (CPI, PPI, & UMich all hotter than expected) and Consumer Confidence tumbled (on cost of living concerns)
  
  
• Ugly: Geopolitical chaos (you know that story) and long-bond auctions (is the world turning its back?)

Stickier-than-expected 'actual' inflation and soaring 'expected' inflation piled on to geopolitical risk this week as US macro data disappointed...



Source: Bloomberg

...with 'soft' survey data starting to roll over and catch down to 'hard' data's dive...



Source: Bloomberg

But it was 'war hedges' that dominated...

Gold surged over 5% this week after the attacks on Israel - its biggest weekly jump since March - sending spot prices back above $1900...



Source: Bloomberg

Oil prices also soared with WTI up over 5% on the week (its second biggest weekly gain since April)...



Bonds were bid with the long-end dramatically outperforming...



Source: Bloomberg

But 2Y yields bounced back above 5.00%, flattening the yield curve (2s30s) dramatically on the week (but still well off the mid-Sept lows)...



Source: Bloomberg

VIX spiked back above 20 as protection-buyers stepped in, sending skews and VVIX soaring...



Source: Bloomberg

On the week, Small Caps were clubbed like a baby seal but Nasdaq ended perfectly unchanged while the S&P and Dow managed modest gains - despite some ugly down-drafts intraday...



Energy and Utes outperformed while the consumer was punched in the face...



Source: Bloomberg

Airlines worst weekly drop since March...



Source: Bloomberg

JPM, WFC, and C all ended the week higher (helped by today's earnings)...



Source: Bloomberg

But, despite big bank earnings beats, the Regional Banks index was dumped...



"Most Shorted" stocks fell for the 9th week of the last 11 to its lowest weekly close since May 2020...



Source: Bloomberg

The dollar ended marginally higher, driven mostly by a post-CPI panic-bid yesterday. But notably, the Bloomberg dollar index stalled at the pre-payrolls level from last Friday..



Source: Bloomberg

Crypto dropped on the week with Bitcoin finding support around $26,500...



Source: Bloomberg

Ethereum was also monkeyhammered lower, now at its weakest relative to Bitcoin since July 2022...



Source: Bloomberg

Silver also soared with futures tagging $23 intraday...



Finally, we note that financial conditions were basically flat this week after tightening dramatically from mid-Sept...



Source: Bloomberg

It's notable because, as Nomura's Charlie McElligott notes, this leads to a dysfunctional feedback loop where, ironically, via the Fed’s extreme FCI reflexivity “The Fed says ‘the market did the (tightening) job’ for them over multiple weeks…but then the market undoes that job in the matter of just a few days”

McElligott's current state of “the psychological chop”:



Will it "be over" enough to warrant action?

 

The Bull Market Turns One
Posted on October 12, 2023

“There are no gains without pains.” – Benjamin Franklin

Hard to believe it, but one year ago today the vicious bear market ended. I remember it well, as the bear market saw the S&P 500 down 25.5% from the early January lows at the close on October 12, 2022. The very next day we saw the hotter-than-expected CPI print and futures tanked on the news. It felt like all hope was lost. Then a funny thing happened. Stocks soared and closed up 2.60% on that day, more than 5% off their intraday low. That was the ultimate capitulation that was necessary to end the bear market. As Mr. Franklin said above, there were a lot of pains, so some gains were due.

In fact, I joined Yahoo! Finance right after this huge reversal and talked about why October was a bear market killer and we were likely near a major low.

If this sounds somewhat familiar it is because we saw stocks tank last Friday on the hotter-than-expected employment report. That’s right, our economy creating 336,000 jobs was somehow a bad thing. This number was way more than any economist expected and to us, it put an end to the silly talk about an imminent recession. Although futures tanked on Friday, by the end of the day stocks were firmly in the green, which was followed up by more gains on Monday and Tuesday. Could we have just had another major low in October? We think the odds do favor it.

So, let’s talk about bull markets. At the one-year mark this time the S&P 500 is up more than 21%, which would put it at one of the weakest first years of a new bull market ever. In fact, the average first year has seen stocks gain nearly 39%. What is going on this time? For starters, as we’ve said repeatedly, we don’t see a recession on the horizon, as the economy is on much better footing than most economists claim. If we can avoid a recession next year (no small feat for an election year), then there’s a good chance for more solid gains in 2024. In fact, this was the worst first year to start a bull market since after the 1987 bear market, gaining ”only” 21.4% that first year. The good news? The second year of that bull market was the strongest on record, up 29.0%. Could we see another outsized gain after modest gains this first year? We wouldn’t want to bet against it.



One more interesting note about next year—it’s the fourth year of the Presidential cycle, otherwise known as an election year. Historically, stocks gain 7.3% during election years, better than only the mid-term year in the four-year cycle, which averages 6.0%. (The first year of a Presidential term tends to be the best for stocks.) But what you need to know about an election year is the returns are much better when there’s a first-term President in office, up 12.2% on average and higher 10 out of 10 times since 1950. In fact, returns are actually slightly negative under a second term President in an election year, thanks to the 10.1% drop the lame duck year of President Clinton (2000) and the 38.5% drop the lame duck year of President George W. Bush (2008).



Buckle up, as we head into the election year there could be many new worries and concerns, but we remain optimistic that this bull market has plenty of life left supported by an economy showing no real signs of breaking down.

Continuing Claims Come in Worse
Thu, Oct 12, 2023

While CPI was the main focus of the morning's economic data, jobless claims were the other major release of the morning. Last week's reading on seasonally adjusted initial claims was revised up by 2K to 209K and this week's reading was unchanged from that level. That was slightly below forecasts which were calling for claims to rise further to 210K. Overall, claims have seen a rebound in the past few weeks, but that is still well below the range of readings from earlier this year.



Being the fourth quarter, seasonal tailwinds will shift to headwinds over the next few months. Prior to seasonal adjustments, initial claims saw a sizeable 22.8K week-over-week jump. Claims rising in the current week of the year is very normal as it has occurred 85.7% of the time historically. Given that increase, that would confirm last week as the likely annual low in unadjusted claims (at least for the time being). As we noted last week, that is a bit later than normal, but not exactly without precedence.



Relative to initial claims, continuing jobless claims have maintained a more consistent trend over the past several months. This year has seen continuing claims consistently grind lower, but that trend is not as strong as it once was as claims have appeared to round out a bottom. Continuing claims topped 1.7 million this week. That is the highest reading since the week of August 19th and was well ahead of expectations of 1.675 million. While claims are by no means weak (outside of the few years prior to the pandemic, current readings remain around some of the lowest since the early 1970s), both initial and continuing claims have seen modest deterioration recently.



Bulls Pile Back In
Thu, Oct 12, 2023

The S&P 500 has been in rebound mode over the past week, having now rallied 3.45% off the October 3rd low. In turn, sentiment has taken a distinguished bullish turn to start out the month of October. That compares to last month when sentiment took a more bearish tone as we discussed in Tuesday's Closer. On top of a 2.2 percentage point increase in bullish sentiment last week, this week saw the percentage of respondents to the AAII survey climb another 9.9 percentage points. That brings bulls up to 40%, the highest since the first week of September, and back above the historical average (37.5%).



Bearish sentiment saw a corresponding pivot lower. Bears are now down to 36.5% versus the recent high of 41.6% last week. While that is only the lowest level since the week of September 21st, it was the largest week-over-week drop since June 8th. Additionally, that decline has not been enough to bring bearish sentiment back to normal levels as it is still 5.43 percentage points above the historical average.



That has resulted in the bull-bear spread tipping back into positive territory for the first time in a month.



Of course, the drop in bearish sentiment was not nearly as large as the increase in bullish sentiment. That was because there was a notable decline in neutral sentiment. That share of respondents reporting that they expect unchanged prices fell by 4.8 percentage points this week. Not only was that the fourth week-over-week decline in a row, but it was also the biggest one-week decline since July. Now at 23.5%, neutral sentiment registered its smallest share in just under one year.



Four Reasons We Believe Stocks Won’t Crash in October
Posted on October 10, 2023

“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” -Mark Twain

October is known for many things, from sweaters, to leaves on the ground, to the World Series, to pumpkins, and yes, to market crashes. It is also my birthday month, but for today’s blog, we will focus on why we believe there won’t be another October market crash.

Stocks have had a rough go of things since the late July peak. As we’ve noted many times, the past few months shouldn’t have come as much of a surprise, given the third quarter tends to be a time investors pause to catch their breath. Now we are hearing more and more that another October market crash is around the corner. Higher yields, a hotter economy, geopolitical worries, and the possibility of more rate hikes, are all adding to the near-term worries.

Think about it. Some of the most spectacular crashes in history took place during in October. 1929 and 1987 stand out, but 2008 was another horrible October. The worst month ever was a 31% drop in September 1931, highlighting that the fall months in general can be quite tricky. Here’s the thing though — I think October gets a bad rap, as it’s not so much a ‘bad’ month as a month of high volatility. Since 1950, the S&P Index has been up about 1% on average in October which ranks as the 7th best month of the year, not all that bad. It also ranks as the 3rd best month the past decade and 4th best the past 20 years. Pre-election years aren’t that great, but overall October has historically not been as bad as the media makes it sound.



How can this be? Well, positive average returns with such large declines means October has also had some huge gains. October gained 16% in 1974, 11% in 1982, and 11% in 2011. The bottom line is if you are looking for a crash this month simply because it has had a few crashes in the past, we think you’ll be quite disappointed.

Here are four reasons we don’t think we will see an October crash in 2023.

Stocks Are Oversold
First, stocks are quite oversold on many levels. Yes, most crashes took place from oversold levels, but with the economy as strong as it is, as Sonu discussed last week, we think the odds of a crash are very low. The majority of the time stocks are oversold we’ve been closer to a major low rather than close to a crash.

Last week, for example, saw less than 10% of the components in the S&P 500 above their 50-day moving average, a sign of extreme oversold levels. Although this signal didn’t work well in 2007/2008 or right before COVID, the majority of the other times we were close to a major low. Given we don’t think we are in the middle of another generational financial crisis or once in a century pandemic, now could be closer to a major low than most think.



Stocks Tend To Bottom In October
Second, including last year’s bear market, 7 of the past 18 bear markets ended in October. Our friends at Bespoke reported that out of 60 corrections since 1945 (declines of 10% or more), 18 of them ended in October. The bottom line is we are much more likely to see a major low take place in October than a market crash, and we think this year will be another major low.



Also, looking at the past 10 pre-election years, stocks tend to bottom around now, right before an end-of-year rally. A major sell-off from here would be quite out of the ordinary.



A Weak September = A Better October
Third, September is historically a bad month for stocks and when the first half of the month is down big, the second half tends to do even worse. That sure played out this year.

Here’s some good news. When the S&P 500 falls more than 3% in September, but is still higher for the year going into October, a bounce is quite likely. October has gained five out of six times when we’ve seen this and stocks have never been lower in the fourth quarter, with the average return in October and the fourth quarter both up substantially.



Fear Is Everywhere
Fourth, if everyone has already sold, then only buyers are left. Think about one year ago. Things felt horrible, but that is a classic time for a bear market to bottom.

We think we are near a peak in negative sentiment, which could be another clue stocks won’t crash in October. One sentiment indicator we watch is the put/call ratio. On Wednesday of last week, we saw a huge spike in the CBOE Composite put/call ratio, one of the largest spikes ever going back two decades. That’s a lot of fear.



Here’s some examples of when we’ve seen the CBOE Composite put/call ratio spike above 1.5 since 2010. As you can see, this is quite a rare signal, but also very bullish, as stocks have never been lower a year later and in fact have averaged more than 20% higher.



Here’s the same data, but overlayed on the S&P 500. Again, these signals have tended to come near significant market lows.



The McRib Is Back
Here’s a bonus reason we believe stocks won’t crash, and of course this one is meant to be fun. It turns out stocks do much better when the McRib is being sold. Given McDonald’s just brought it back (when they said it was gone forever), this could be another reason stocks can surprise higher in October. Thanks to my friend Nick Maggiulli for this one.


Wrapping It All Up
Yes, there is a lot of fear out there, but there’s an old saying that the market climbs a wall of worry. In late July, after one of the best starts to a year ever, there wasn’t a lot of worry out there. Now after seasonal weakness there are many worries building up. Given the economy remains on strong footing, we continue to expect stocks to make a major low soon and we believe we will likely see a nice fourth quarter rally.

Aerospace and Defense Take Off
Tue, Oct 10, 2023

While the conflict between Israel and Palestine is of course still a risk, especially if worries of Iran involvement proves to be more concrete (which we discussed in today and yesterday's Morning Lineups as well as last night's Closer), markets appear to be largely looking past the events. Equities have rallied broadly over the past couple of sessions, but some of the best performers have of course been those stocks whose businesses would be most impacted by the conflict. Yesterday, the S&P 1500 Aerospace & Defense Industry rallied 5.45% on the day. That marks the biggest single-day jump in the group since November 9, 2020 and the 20th best day since 1995.

Amazingly, that single-day gain far surpasses other days when war was front and center in the news. For example, last year when Russia invaded Ukraine, the group only rallied 2.21% on the first day of the invasion (although that invasion was more telegraphed so the group rallied ahead of the news). If you look back to various points of the start of the wars in Iraq and Afghanistan, again, the industry did not see nearly as large of gains. For example, on September 20, 2001 when Bush announced the "War on Terror" the group fell 5.93% on the day, and when the US went into Afghanistan (10/7/2001) and later Iraq (3/19/2003), the group gained 1.8% and 0.8%, respectively. When looking to other daily gains of 5%, predominately those have simply occurred during volatile market periods (i.e. Dot Com Era, Financial Crisis, and COVID Crash) rather than times when news headlines would justify the move.



In the table below, we show each member of the S&P 1500 Aerospace and Defense industry as well as their performance from the broad market high at the end of July through last Friday and performance yesterday. Most of these names fell from the end of July through last Friday, and Hexcel (HXL) was the only one to not rise yesterday. Meanwhile, Northrop Grumman (NOC) was the biggest winner with an 11.43% gain. L3Harris (LHX) was also not far from a double-digit daily gain while Huntington Ingalls Industries (HII), Lockheed Martin (LMT), General Dynamics (GD), and Mercury Systems (MRCY) were all up over 5%.



Below we break down each time the Aerospace and Defense industry has rallied at least 5% in a single day without having done so in the prior three months. As shown, yesterday was not the largest jump of those prior 8 instances. Historically, median performance has been stronger than the norm over the next day to three months out with further gains more often than not.

 

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 10.13.23-


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 10.13.23-

 

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Here are the upcoming IPO's for this week-

 

Stock Market Analysis Video for October 13th, 2023
Video from AlphaTrends Brian Shannon


ShadowTrader Video Weekly 10/15/23
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 (10/16-10/20) <-- click there to cast your weekly market direction vote and stock picks for this coming week ahead!

Daily SPX Sentiment Poll for Monday (10/16) <-- 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 10.16.23 Before Market Open:

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

Monday 10.16.23 After Market Close:

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

(T.B.A.)

Tuesday 10.17.23 Before Market Open:

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

(T.B.A.)

Tuesday 10.17.23 After Market Close:

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

(T.B.A.)

Wednesday 10.18.23 Before Market Open:

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

(T.B.A.)

Wednesday 10.18.23 After Market Close:

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

(T.B.A.)

Thursday 10.19.23 Before Market Open:

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

(T.B.A.)

Thursday 10.19.23 After Market Close:

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

(T.B.A.)

Friday 10.20.23 Before Market Open:

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

(T.B.A.)

Friday 10.20.23 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-
($TSLA $NFLX $BAC $UAL $LMT $T $SCHW $ASML $AAL $GS $TSM $ISRG $JNJ $PG $MS $LRCX $LVS $PLD $ABT $AA $BX $IBKR $SFBS $SLB $USB $NOK $AXP $ELV $DFS $KEY $COLB $FCX $BK $JBHT $MTB $NDAQ $TFC $WAL $ERIC $CMA $CSX $UNP $SNA $ELS $MMC $HBAN $FBK $HWC $PNFP)


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

• Most Anticipated Earnings Releases for the week beginning October 16th, 2023 <-- click there to view!

 

Good afternoon 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 2 hours into the US cash market open.

GLTA on this Monday, October the 16th, 2023!

 

Morning Lineup - 10/16/23 - Sigh of Relief
Mon, Oct 16, 2023

After investors were hesitant to take any risks heading into the weekend last Friday, the lack of any meaningful news on the geo-political front has caused some relief. The pace of earnings news this morning has been slow, and the one economic report released so far - Empire Manufacturing - came in pretty much right inline with expectations.

While most major equity averages were higher on the week, the bifurcated nature of the market remains in place. As shown in the snapshot of US equity performance from our Trend Analyzer, large-cap indices managed to squeeze out gains of just under 0.5% last week. Smaller cap indices didn’t fare as well, though. At the bottom of the table, you can see that mid-cap-focused indices were down about 0.5% while small and micro-cap stocks were down over 1%. One thing all these indices have in common, though, is that they’re all below their 50-day moving averages.



Looking at the charts of indices on both sides of the market cap spectrum shows the divergent paths, although neither chart looks particularly good. Starting with the largest cap stocks, the S&P 100 ETF (OEF) has been making a series of lower highs since its peak in the summer, and while it had rallied in the first half of last week, just as it got back near its 50-DMA in the middle of the week, the rally ran out of steam. If there's one thing positive to say about large caps, it's that the uptrend line from last October's low has remained in place.



The downtrend in small caps has been even more pronounced. After breaking down from a head and shoulders top formation in September, the Russell 2000 ETF (IWM) has continued to decline and is now testing the lowest levels since May. While the S&P 100 is still well above its 200-DMA and just fractionally below its 50-DMA, the Rusell 2000 is over 6% below both moving averages and whatever uptrend line that had formed off the lows last fall has been broken.

 

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, October 16th, 2023.