EB Daily Market Report - Tuesday, November 7, 2023
ChartLists Updated
In addition to the daily Upcoming Earnings ChartLists that we do every week during earnings season, we've also updated the following ChartLists:
- Strong Earnings (SECL)
- Strong Future Earnings (SFECL)
- Short Squeeze (SSCL)
- November Seasonality (SEASCL)
The SECL and SFECL were updated for earnings reports through October 27th. I continue to work on last week's earnings reports and hope to re-update these ChartLists (with earnings through at least Friday, Nov 3rd) later this week. Same with the Raised Guidance.
Brief Market Update
There are no economic reports this week until Thursday and few market-moving earnings reports during the week. We're mostly seeing what I refer to as "2nd tier" earnings reports coming in now. They're not AAPL, MSFT, GOOGL, TSLA, etc, but they are still very large companies in key industries like semiconductors ($DJUSSC) and software ($DJUSSW).
This leaves the stock market to trade mostly off technical conditions. The good news is that technical conditions have improved significantly over the past 10 days or so and are now trending UP, in my opinion. As the Volatility Index ($VIX) has fallen well off recent highs near 22-23, the sudden spurts to the downside have nearly disappeared. The action has turned much more boring, which nearly always means GREAT things for the bulls. Also, we're seeing afternoon action that's been primarily bullish and consistent with uptrends.
BUTTTT......there are hurdles that we'll encounter from time to time as we move higher and key support levels that we'll need to hold to the downside, so let's talk about that.
Long-Term
I did not waver one bit during the recent correction. I remained and still remain steadfastly bullish. I see lots of bullish days ahead in Q4 and into 2024. From there, I'll re-evaluate. We're in the 11th year of a secular bull market that began in 2013. History tells us that these bullish super cycles tend to last a couple decades. That would take us well into the 2030s. While I remain quite bullish in the long-term, it does not mean we won't see pullbacks, corrections, and even cyclical bear markets like the ones we endured in 2018, 2020, and 2022 - though it's quite unusual to have 3 cyclical bear markets within a 5-year period. Keep following the Weekly Market Report (WMR) that I publish on Mondays. That's where you'll find more of my long-term market analysis.
Short-Term
I use the daily charts (or more frequent like minutes or hourly) when I discuss short-term action. I use some of the same signals that I use for long-term charts, but these signals don't help us with long-term forecasts. Rather, I use these signals to help me call the short-term and to help identify when risks grow.
We've been on a heater since the October 27th close, but we do have a few minor concerns in the near-term. First, there's price resistance. We'll have plenty of price resistance levels to clear, but one biggie is ending the series of lower highs and lower lows in the recent corrective phase:
A definitive break above 4400 would clear the high of 4393.57 established in mid-October. That would be the NEXT key bullish technical signal triggered. We're literally right up against that price resistance right now.
If we move to an hourly chart, you'll see a negative divergence that's printed with this new price high:
The negative divergence is rather obvious and so is overhead price resistance. So what should we do? Well, that comes down to every member's objectives and risk profile. If I'm a long-term holder, I don't care a bit about 60-minute negative divergences. It has zero influence on how the stock market will be trading next month, let alone next year or 5-10 years from now. If you're a very aggressive short-term trader that uses leverage or options, even a 1 to 3 day setback and cost you a lot of money. I tend take profits in my leveraged positions, which is what I did today, and simply move into ETFs that track our major indices 1 to 1. In other words, I trade without leverage, because it's too risky short-term to keep holding these positions. Yes, the market may keep moving higher, but there's no guarantee. My use of leverage takes place when I believe the odds favor a further short-term advance. At price resistance (and with a negative divergence), I'll take my leveraged profits and wait until the risks favor leverage again.
But everyone must make that choice for himself/herself.
Happy trading!
Tom