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RoboStreet – November 17, 2022
Week Turns Negative on Positive Retail Data
As we wrap up the latest earnings season, the focus has begun to shift toward year-end market-moving events. With another FOMC behind us and the current earnings season reaching its last legs, investors are now looking toward the upcoming inflation reports and the year’s last Federal Open Market Committee meeting, both scheduled for December, as the next marquee market events.
Earnings have returned primarily positive which initially instilled a sense of optimism in the market, however, several reports triggered alarming moves. Target, for example, sold off sharply following its earnings report that featured a glaring amount of inventories the retail giant has struggled to move. Furthermore, October’s retail report, which was also recently released, shows an unbothered economy, failing to slow down by the expected action of the Fed. With hiking interest rates, the economy has yet to show a sense of slow-down furthering inflation concerns.
With markets turning lower this week after seeing several boisterously positive sessions this month, the question of whether the bull market has returned or the bear market resumed has been put aside as it is clear there is still some give and take in the market. We are likely still in a bear market that has occasionally overperformed with supportive bull runs, but the fundamentals point to a bear landscape.
Additionally, inflation reports (CPI, PPI) came in better than expected which had offered support earlier this month. The wave of positive learning events continued with midterm elections offering political clarity and the first signal for alarm came this week with the retail data. As the data showed, Fed action has yet to slow the economy as intended which is a point of concern.
Even though it may seem unstable, I believe the market will continue to grow until the end of the year. There’s always the potential for more change whenever there is a CPI report, and we can expect another one in early December. With this in mind, there is one sector and one symbol that has caught my eye for the upcoming week but before we break that down let’s look at the current market conditions.
Presently, the overhead resistance levels in the SPY are at $400 and then $416. The support for $SPY is at $390 and then $380. With the market moving higher last week, as long as SPY remains above recent lows – expect the market to continue higher.
Based on my analysis, I predict that the market will keep rallying for the next few weeks. In the short term, however, it is overbought and may soon drop back down again. I would be market neutral at this time and encourage subscribers not to chase the market to the downside or upside.
Inflation looks to be prolonged as the short 2-year yield closed near 3.5% while 10 and 30-year yields eased off their record highs. The yield on the 10-year Treasury note is down at 3.693% at the time of publication, while the yield on the 30-year Treasury note is at 3.846%, also down from earlier this week.
Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, seen above, we see mixed signals in our 10-day prediction window.
With the 10-year yield approaching 3.5%, the dollar has weakened and should fuel the rally. Similarly, looking ahead we are due for a Christmas rally which should boost markets before the bear market returns early next year. As next year kicks off, we will see the latest earnings data for Q4 which can either elongate the bull run or instigate the bear market.
As the final few weeks of 2022 approach, I have spotted a sector that I will be partaking in as this area has shown weakness but could rally easily with a downward dollar.
Nasdaq QQQ Invesco ETF (QQQ) is the RoboStreet featured symbol. According to our Stock Forecast Toolbox, QQQ is showing a steady vector in its 10-day forecast.
With yields on the move lower and the dollar also trading lower, tech is in a unique position to rally alongside the holiday rally. To ensure there are supportive data points for this, let’s review my A.I. toolset in accordance with QQQ.
Reviewing the $QQQ Seasonal Chart, seen above, we see that there is a big gap between the annual season price, marked in green, and the current year price, marked in blue. The symbol is showing potential to go higher in the next 20, 30, 40, and 50-day ranges with a decently high forecast percentage. With all four time ranges glowing the “higher” signal, I am liking what I’m seeing for QQQ’s outlook for the next few weeks. This forecast is similar to the one we saw in the Stock Forecast Toolbox, which only adds to my confidence in the symbol.
Looking into the Stock Forecast Toolbox predicted data for QQQ, the latest snapshot shows a symbol trading far closer to its 52-week low providing plenty of room for the upside. Similarly, QQQ is trading near our predicted high showing that the symbol is topping estimates. This, along with the runway for the upside, is a great signal that QQQ and tech in general should prosper these next few weeks.
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We email subscribers an online newsletter every other week, over the weekend, that includes my fundamental commentary on the market landscape, a technical read on near-term market direction, an update on current positions, and one or two new recommendations to act on when the market opens Monday.
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The market continues to shape up to be as unpredictable as I’ve seen since the pandemic broke out in early 2020 – and we just started Q4! Inflation, Fed decisions, geopolitical tension, and the Ukraine war – all factor into how money is being made and lost. Don’t go at it alone in this investing landscape, but instead, put RoboInvestor to work today and add a big layer of confidence to your portfolio going into tomorrow. We’ll be with you every step of the way!
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