The Weekly Drop - Week of October 30th, 2023

Will we get a second round of fireworks this week?

Good morning investors!

I think I’m still recovering from the week we just had. I said to expect fireworks and we certainly got that. Hundreds of earnings reports, a number key economic reports and a wave of selling not seen in months. It was almost too much to keep up with.

But you subscribe to this newsletter for two reasons — I don’t miss a thing and I cut through all of the BS and give you what you need to know in easy to digest, bite sized pieces of content.

** Speaking of bite sized pieces, I’m running a Halloween Sale. Get 20% off the CMG Community for one year. Sale ends November 1st.

More on that later. For now, grab your coffee and let’s dive into this week’s overview.

Be sure to subscribe if you haven’t already and hit that like button if these Weekly Drops are helpful.

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Market Recap

Last week was eerily similar to the week prior. Everything began quietly, but that all changed after Wednesday’s housing report. New homes sales were significantly higher than estimates, indicating the housing market is still strong and people are still willing to pay these higher prices. The data caused treasury yields to surge, which put pressure on equities. It was nearly identical to the story from the week before.

The common theme among economic reports last week was a strong consumer in Q3. Thursday’s GDP was well above estimates and nearly double the Q2 numbers thanks to a significant increase in consumer spending. Friday’s PCE report showed inflation was in line with estimates, but consumer spending jumped in September.

All of this, combined with a majority of companies reporting strong earnings in Q3 thanks to a resilient consumer, caused fear among investors that inflation could rear its ugly head again. Even consumers agree as the University of Michigan Consumer Survey showed inflation expectations over the next year increased to the highest level since February.

Once the selling started on Wednesday, it didn’t stop. The S&P fell more than 1% every day to close the week. Coincidentally, as I mentioned last week, once the 200 day moving average broke, the waterfall ensued. And that was a freebie, imagine what else you’re missing 😉

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

• Microsoft beat on the top and bottom lines, Intelligent Cloud revenue was higher than anticipated

  

• Alphabet beat on the top and bottom but Google Cloud and Ad revenue were lower than expected

  

• Meta also beat on the top and bottom and provided strong guidance

  

• Amazon blew earnings and revenue estimates out of the water, guidance was on the lower end of estimates

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

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The Week Ahead

Earnings season barrels on and we have several crucial jobs reports on the docket this week. After last week’s sell-off, this will be another big week for the market.

Earnings Reports

Apple tops the list of big companies reporting this week. Other names include McDonald’s, Amgen, AMD, CVS, PayPal, Shopify, Block, and Starbucks. As has been the case all earnings season, there really shouldn’t be any surprises for the last quarter. The consumer was strong, the economy was chugging along and the reports should indicate that. But pay attention to the forward guidance, that is the key.

*Note - I will be creating one page summaries for key reports. Be sure to follow me on Twitter.

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

Nonfarm payrolls, ADP employment and JOLTS data will be in focus for the Fed and investors alike this week. The labor market has held up well so far but that could be changing. This data will likely influence the next interest rate decisions.

We also get two key PMI reports that have the capability to move markets.

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 haven’t joined the CMG community yet, today is your lucky day!

I’m offering you the opportunity to subscribe and SAVE 20%. No tricks here, only treats for Halloween.

By joining the club, you get immediate entrance into the community chat, and access to all of the premium articles here on Substack and all of the locked content on Discord!

What are you waiting for? Take advantage of this deal and join today!

If you aren’t sure if this community is right for you, 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.

October 20th - If the 200 day moving average breaks, 4150 is the next level. If that breaks, there’s big trouble for the S&P. ✅ Once the 200 day broke, 4150 came quick. The S&P closed well below that level last week.

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. Even though the VIX is now firmly above 20 and the storm of selling is here, I have still been wrong.

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. ❌ Bitcoin re-tested the trend and blew past it, surging to $35k. My hand is up on this one - I was wrong.

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. See above.

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 🤷‍♂️