John Seville analyzing Netflix stock prior to their 25% decline in share price prior to their October 15, 2014 earnings announcement.
Exciting day tomorrow! Why? It’s October. The time for making money, avoiding the cold and…..making more money!!! Yep, its typically the start of the best season of trading all year round.
Now boy do I have a treat for you tonight. The potential answer to where we are going next in the market. Tomorrow is the first day of October and one thing everyone might not know is that the first day of the month and option expiration Friday (third Friday of the month) are very important as often key turning points are established on these days. In the graph below for example you will notice that the last two major turning points on the S&P were on those days exactly.
So! Tomorrow brings another month around and at the same time we are about to touch on the 23.6% Fibonacci line as well as the uptrend line forming the bottom of the Rising wedge.
Predictions? Well i think that if we hold these two levels we are in store for another leg up in the market testing 1,720 – 1,740. Longer term prediction….. that will be the last high we see before a correction.
If we hold ….. its “short term long hunting season..” (Wish I could do an Elmer Fudd impression better than that.. but you get the jist).
All eyes will be on tomorrows Fed address as to speculation that it will start tapering off asset purchases in September, cutting back from $85 billion per month to $70 billion to $75 billion. With this as the census opinion any deterrence could send the market spiraling down or shooting to all new highs anyone’s guess at this point.
Markets seem to be fine with the expectations of minimal tapering as the Dow Jones and S&P 500 both closed higher for the third consecutive day. The Dow Jones closed near the middle of its days range closing up by 34.95 points to end at 15,529.73. It is currently on pace for its second best monthly gain of 2013. The S&P 500 added 7.16 points to end at 1,704.76, finishing above 1,700 for the first time since Aug. 5. The index is set to post its strongest first three quarters of a year since 1997. The NASDAQ was the big winner today rallying by 27.85 points to close at 3,745.70.
Tomorrow will be a very interesting day and could set the tone of the markets for the remainder of the year. With the Feds wrapping up their 2 day meeting we will a statement from them at 2:00 pm EST followed up with a question and answer period with Ben Bernanke. We will also see new housing starts numbers and crude oil inventory numbers as well. There will be 12 companies reporting earnings tomorrow including FedEx Corp, General Mills Inc, and Oracle Corp. Happy Trading!
As the U.S. Government gets closer and closer to reaching the cap of its $16.7 trillion debt ceiling we get closer and closer to running the risk of the U.S. Government going into default. Since May the government has avoided defaulting on any of its bills by employing emergency measures to manage its cash, such as suspending investments in pension funds for federal workers. Currently the government is in a stalemate as the Obama administration has vowed not to negotiate with Congress over the debt ceiling. Today Treasury Secretary Jack Lew said that he United States could have less than $50 billion in cash in mid-October when the government exhausts its legal borrowing capacity.
The debt ceiling idea came about in 1917. Before then, Congress had to approve borrowing for each item when the government needed money. Since 1960, Congress has acted 78 times to permanently raise, temporarily extend or revise the definition of the debt limit—49 times under Republican presidents and 29 times under Democrats.
Concerns have obviously taken an effect on the U.S. markets which has now given up all of its gains from last week with the Dow Jones and S&P 500 currently on 4 day losing streaks. The Dow Jones fell a further 66.79 points to end at 15,334.59 and is now down 375 points since its peak last week. The S&P 500 slid back beneath 1,700 to close at 1,697.42 and has seen significant divergence in its money flow. The NASDAQ was able to stop the bleed for now and closed up by 2.97 points to finish at 3,768.25. On the other hand the Russell 2000 Index, which measures the performance of the small-cap segment of the U.S. equity universe, rose to a new all time high today. Small-cap stocks have led for most of the year, surging nearly 27 percent.
Tomorrow we will see earnings announcements from 8 companies including AutoZone Inc, Bed Bath & Beyond Inc, Jabil Circuit Inc, and SYNNEX Corp. On the economic front we will also see numbers from the change in the total value of new purchase orders with manufacturers for durable goods; New Home Sales; and Crude Oil Inventories the Richmond Manufacturing Index. Be sure to listen to tonight’s Trading Room if you have not already as it most surely provide some fantastic knowledge and education. Happy Trading!!