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It will easily be the most challenging week of October, with a PPI report Wednesday morning, the FOMC minutes Wednesday afternoon, and the CPI report Thursday morning. On top of that, there will be a 3-Yr Treasury auction on Tuesday afternoon, a 10-Yr auction Wednesday afternoon, and a 30-year action Thursday afternoon. That will be a lot of data and potential areas where yields could move on either economic data or demand for newly issued bonds.
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On top of that, following the strong job report on Friday, it seems possible that worries will be high heading into that CPI print, which could prompt plenty of put buying this week as investors try to hedge themselves. Estimates for CPI are 8.1%, down from 8.3% last month. Right now, the Cleveland Fed is forecasting a CPI of 8.2%. Meanwhile, core CPI is estimated to rise to 6.5% from 6.3%. The Cleveland Fed is looking for the core to rise to 6.6%. Given how reliable the Cleveland Fed’s forecasts have been over the past year, you could see why the market might be nervous heading into those reports. Headline CPI has beaten the Cleveland Fed’s forecast 10 out of the last 11 times and 15 out of the previous 18 times. So that may suggest that the consensus forecasts are too low.
Given the hotter-than-expected unemployment rate, the risks are high this week. Especially when the Fed minutes will likely reveal that the FED is willing to tolerate a rising unemployment rate and sacrifice growth to achieve its objective of getting inflation back to its 2% target.
On top of that, OPEC decided to cut its oil production, which suggests the price of WTI oil could head back to $109 following a falling wedge breakout on October 4. Additionally, the downtrend in the RSI has broken out to the upside, suggesting a long-term bullish reversal of the trend.
Gasoline may not help either, as its RSI breaks out, signaling a bullish reversal, and the price is very close to breaking above significant resistance at $2.73, which could send it back to around $3.10.
S&P 500 (SPY)
And now that the S&P 500 rallied so much to start last week, the RSI is only at 37.7 with a lower Bollinger Band at 3,522. It needs to fall below 30 on the RSI and that lower Bollinger band to hit oversold levels, at least to start the week. I do not think a drop to 3,517 would be challenging this week, especially after the index formed a diamond island reversal last week, combining an island reversal pattern and the diamond pattern I like to use.
If oil runs higher, as the chart above suggests, then Occidental Petroleum could be one stock that benefits and heads higher toward the upper end of its trading channel to $77.50.
Exxon could benefit this week as its RSI nears a breakout. Along with the potential for the shares to run higher to the uptrend around $105 to $107.
Meta broke down on Friday and fell out of a consolidation zone. How far down Meta can go from here can be left to one’s imagination. Yes, it may drop to that 1.618% zone on the chart below, but at the same time it could stop at any of those other fib levels along the way too. In the meantime, the low $120 seems ideal for the shares to gravitate towards.
Tesla finally fell to support at $220, and the chart still looks pretty weak, with the following significant level to watch for at $209 and $180.
Shopify is still holding the trend line, and the RSI is still bullish. So I still think that SHOP is going to turn higher. Maybe I’m kidding myself since I own the thing, but generally speaking, a rising RSI and falling stock price is a positive divergence, and if the stock can clear $30.50, there is a chance it could make a pretty big run higher. Of course, if that trend line around $27 breaks, that would be a disaster and lead to much lower prices.
Charts used with the permission of Bloomberg Finance LP. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investments.