EB Daily Market Report - Monday, October 31, 2022
Happy Halloween!
I'm not sure if the Fed will be giving us a trick or a treat on Wednesday, but I do expect Fed Chief Powell to be dressed up as The Grinch Who Stole Christmas.
This will be a brief update as I'm working on the Seasonality Report for November and I'm going to try to get this sent out later today or before the market opens tomorrow. I also would like to update the Short Squeeze ChartList (SSCL) and write the Short Squeeze Report for November as well. If the market does move higher after the Fed, many short squeeze stocks could benefit. A few are already beginning to make moves. Keep an eye on volume. If volume moves back through their averages and price action can begin to clear key moving averages and/or price resistance, gains could accelerate quickly. Please understand, however, that trading short squeeze stocks carries SIGNIFICANT risk. The returns can be phenomenal, but risks are high. I typically trade 1/4 to 1/3 of my normal-size position when I buy a short squeeze stock. I have taken small positions in NKLA, WKHS, W, BYND, and BLNK. I may add to these positions if there's further strength with increasing volume.
As far as the action today goes, there was some selling at the opening bell and during the first hour (sound familiar?), but there was buying that took us back to the opening level - before backing off again in the last 30 minutes or so. The selling has been a bit stronger on the NASDAQ today, while the Volatility Index ($VIX) has jumped 1.20% on the weakness.
Energy (XLE, +1.29%) is the only sector higher today and this is despite lower crude oil prices ($WTIC, -1.91%). Nearly all commodities are lower, though natural gas ($NATGAS, +11.54%) is an exception. The 10-year treasury yield ($TNX) has jumped 9 basis points to 4.10%, not too surprising as many bond traders are likely selling bonds to capture profits from the past week or so. It also makes sense to lessen risk heading into the Fed meeting as this Fed has a history of triggering selloffs in both bonds and stocks. At some point that will change, but whether it happens this meeting is completely up in the air. Just keep in mind that our biggest selloffs in U.S. equities since June have essentially followed either (1) a Fed meeting or speech, or (2) a CPI report. The October CPI report is due out on Thursday, November 10th.
I expect things to be relatively quiet until the Fed announcement on Wednesday at 2pm ET. We'll see.
Happy trading!
Tom