November 2022

Executive Market Summary

• Futures were up slightly overnight as the NASDAQ tries to reverse its 3-day losing streak from just below its 20-day EMA
• Crude oil ($WTIC, +2.66%) has spiked back above $80 per barrel; energy (XLE, +0.08%), however, is relatively flat on the session thus far
• The market is in "risk-on" mode, at least temporarily, with communication services (XLC, +0.61%) and technology (XLK, +0.49%) leading the action
• Fed Chief Powell will discuss our economy in a speech scheduled for 1:30pm ET; volatility could spike, depending on what is said about inflation, interest rates, future policy, etc.
• The 10-year treasury yield ($TNX) is up 3 basis points to 3.77% as bond traders sell and lock in profits ahead of the speech
• Renewable energy ($DWCREE, +2.68%) is notably strong today; Jinkosolar (JKS, +9.17%) is surging
• Netflix (NFLX, +3.31%) is helping to pace internet stocks ($DJUSNS, +1.09%) higher

Market Outlook

I've mentioned in recent trading days that we've never had a secular bear market decline where the Volatility Index ($VIX) moves below 16. In other words, if we see the VIX drop back below 16, it's much more likely the falling VIX confirms the end of the bear market. I want to show you visually what this looks like:

The thick solid red horizontal line at 16ish marks the lowest levels of the VIX during the two secular bear market declines in the early 2000s and again from 2007 to 2009.

Sector/Industry Focus

Computer services ($DJUSDV) is an area within technology that saw a big boost on November 10th when the October CPI came in lower than expected. Unlike most other growth areas, however, the DJUSDV has managed to hold onto most of its recent gains. Its AD line is strong and I really like the improvement in its relative strength:

Given the strength here and bullish momentum present, I'd expect to see any weakness contained at or above the rising 20-day EMA. A very significant absolute price breakout would occur on any close above 193.

ChartLists/Strategies

I have said on many occasions that I love to buy stocks at gap support, created by recent earnings. When new fundamental information is released and a stock gaps higher, and then continues moving higher, I like to buy at that opening price when it returns there. Yesterday, SPT was an example. It's so far held 54.00 gap support and it was nearly 5% higher early this morning. Here is another one that I bought this morning as it hit its key gap support:

I showed a 3-month chart so you could easily see the gap support that I'm referring to. TASK posted excellent quarterly results after the closing bell on November 7th and check out the volume that accompanied its move higher the next day. This is a risky trade and TASK doesn't normally trade big volume on a daily basis, so it's not for everyone, but I believe it has the potential to quickly move back toward its recent high. I'm willing to take the higher risk with this trade. 18.49 is gap support and that's what I'd like to see hold on a closing basis. Failure to do so would increase the likelihood that TASK trades down to the bottom of gap support at 16.04. The success of this trade may depend quite heavily on whether growth stocks continue to struggle on a relative basis. Obviously, this one would do better if money rotates back INTO growth stocks.

TASK is in the computer services ($DJUSDV) industry, which I featured earlier in the "Sector/Industry Focus" section above. I ALWAYS will prefer trading stocks in strong and/or strengthening industry groups.

Earnings Reports

Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include several companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.

Wednesday, November 30:

CRM, RY, SNPS, SNOW, HRL, BEKE, SPLK, PSTG, FIVE, OKTA, DCI, NTNX, XPEV, ESTC, PVH, BOX, VSCO, WOOF, LZB

Thursday, December 1:

TD, BMO, DG, CM, MRVL, KR, VEEV, ULTA, ZS, PATH, CHPT, SMAR, ASAN, PDCO, AMBA, PD, MEI, GIII, DBI

Economic Reports

November ADP employment report: 127,000 (actual) vs. 200,000 (estimate)

Q3 GDP (2nd estimate): 2.9% (actual) vs. 2.7% (estimate)

November Chicago PMI: 37.2 (actual) vs. 47.1 (estimate)

October pending home sales: -4.6% (actual) vs. -5.0% (estimate)

Happy trading!

Tom