The Weekly Drop - Week of October 23rd, 2023

The market is at a crucial point - this week has the potential for some serious fireworks.

Good morning investors!

The small rally came to an end last week thanks in part to stronger economic data than anticipated. That’s right, good news is bad news for the market as strong data leaves the door open for more rate hikes.

The S&P did end the week at a key level though, making this upcoming week a huge one for the market. Whatever happens here could dictate how the market trades the rest of the year. Will the bears win? Or can the bulls regain control?

One thing is for sure — there’s plenty of reports on the calendar that will certainly add to excitement.

Grab your coffee and let’s dive into this week’s overview.

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Market Recap

The week began quietly, but everything changed after Wednesday’s housing report. Housing starts rose in September while building permits fell less than expected. The data caused treasury yields to surge, which not only put pressure on equities but also led to mortgage rates topping 8% for the first time in 15 years.

The data came after Tuesday’s retail sales data, which were stronger than expected. Both reports combined caused fear among investors that inflation could resurge and lead to further rate hikes from the Fed. That’s when the selling started.

Jerome Powell tried to allay those fears in his speech Thursday, hinting that the Fed may be done hiking, but it didn’t help. Investors heard “higher rates for much longer” and continued to hit the sell button.

The selling continued on Friday, but the options expiry might have saved the market from falling further. It seemed like big money didn’t want to let the market fall below the 200 day moving average. Something to watch next week (hint for Free subscribers 😉, premium subscribers see below).

On top of all the economic news, several major companies also reported earnings:

• Tesla missed earnings and provided weak guidance

• Netflix beat on the top and bottom lines and had a significant increase in subscribers

• Procter & Gamble beat on the top and bottom, provided strong guidance

• Johnson & Johnson also beat on the top and bottom and provided strong guidance

As always, if you want to see a breakdown of all the earnings and economic reports from last week, head to my Discord.

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The Week Ahead

Earnings season is in full effect and we get very important economic data, including PCE inflation, PMI, GDP, home sales and consumer sentiment. After last week, this is going to be a huge week for the market.

Earnings Reports

Several mega cap stocks report this week, including Microsoft, Alphabet, Amazon, Meta, ExxonMobil and Visa. The numbers from these reports will give us insights into the consumer and the economy overall. There really shouldn’t be any surprises for the last quarter but as I keep saying, pay attention to the forward guidance.

Let me know in the comments what stocks you are watching.

And be sure you don’t miss anything by joining the Discord.

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Economic Reports

PCE inflation is the most anticipated report of the week, but PMI data, the GDP report and home sales will also be major catalysts that have the capability to significantly move markets. Buckle up.

Again, be sure you don’t miss anything by joining the Discord. I provide full breakdowns of every report as they are released.

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What CMG is Watching

It’s time for the moment you have all been waiting for - exactly what I am watching in the week ahead and how I’m playing it. Unfortunately, this is only for the premium subscribers.

If you aren’t a member of the community yet, let me show you what you’re missing out on. Here are my recent calls:

Dollar

Since April - the dollar is the key to market. ✅

July 10th and every week since - 100 is a key level for the dollar index. If this level holds, the dollar is about to fly. Dollar is going higher (over and over again) ✅ Dollar has risen every week since, hitting 107 last week.

S&P 500 (hand in hand with dollar trade)

July 10th - the dollar is the key to market, a stronger dollar will put pressure on equities. ✅ The dollar has risen 7% while the S&P has fell 7% over the same period.

September 8th - If the 4440 level holds, I wouldn’t be surprised by a small rally followed by a re-test of 4440 in a few weeks. If the level breaks, look out below. 4440 is your line in the sand right now. ✅ Played out to a tee, and once the damn broke a waterfall of selling ensued.

Volatility

September 11th - I think we’ll wake up one day and see the SPX down 300 basis points, the VIX above 30 and everyone in panic selling mode. ❌ The S&P did drop 300 basis points from that call, but the selling was orderly. The VIX hit 20 before backing off and ending around 17.5 last week.

❌ I’ve honestly been very surprised by the low volatility environment and have been expecting a surge in volatility for a while. I have referred to it as the calm before the storm. Volatility has increased recently but overall, I’ve been wrong on this call.

Oil Prices

July 3rd - oil is heading to $80. ✅ Oil hit $80 end of July.

August 29th - $79 oil is your line in the sand, if it holds oil is heading to $92. ✅ Oil hit $94 end of September.

October 2nd - it’s funny seeing everyone calling for $100 oil now that the trade is extended. Wouldn’t it be funny if everyone waiting for $100 were left holding the bag? We’ll see, but for me, this trade has ran its course. I’m not going to be greedy, I’m taking the profits and running. ✅ Oil fell 9% to $82.

Bitcoin

August 14th - Bitcoin is on my radar, this is a make or break moment. I think it resolves to the downside. ✅ Bitcoin fell to $25k that week.

August 28th - We may get a small move higher here, but I think there’s ultimately more room to the downside from here. $24k is the next level I’m watching. ✅ Bitcoin kissed my trend line before selling off again to $25k.

October 2nd - Bitcoin has held up well since breaking that trend line. My next level remains $24k but the crypto could try to retest the trend. Ultimately, I think it’s heading lower in the long run. ✅ ❌ Still early on this trade, but Bitcoin is kissed another trend line of mine before falling again. $24k remains my next level.

These are just some of the calls I have made over the past few months. And I put my hand up if I’m ever wrong on something.

Plus, this doesn’t even include what the other community members have shared over that time. Pure gems from everyone, such a great group. Join the club today - everyone is welcome!

And if you don’t believe it, there’s a free 7 day trial so you can check the receipts 🤷‍♂️