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Stock Market Outlook 10182023

Hello, everyone, and welcome to Wednesday morning. It’s Stephen Whiteside here from In the premarket this morning, it’s a mixed market. We’ve got stock index futures trading lower, being led lower by the Nasdaq. At the same time, we’ve got commodities pressing higher in the premarket. Now, one stock that’s in the news this morning is United Airlines. They’re out with earnings, they’re down another 5%. So if you’re short any of the airline stocks, no reason to change that position on Wednesday. Now, talking about market stress, we’ve got the VIX for the S&P 500, the VIX for the Nasdaq, and the VIX for the Russell 2000 all elevated, and none of them are trending lower at the moment. So you can see that options traders are fairly stressed at the moment. At the same time, stock indexes are on buy signals at the moment. So that’s usually not the case. We’ve got the Dow, we’ve got the S&P 500, the NASDAQ 100, and the TSX-60 all on buy signals coming into Wednesday’s trading action. So the market is very perplexed at the moment, and I’d be a lot more bullish if the VIX was trending lower.

Of course, what’s probably happening right now is people are probably trying to get ahead of the end of year rally. Here’s where we are right now on the seasonal chart. I believe people think that the worst is over and it’s time to jump in to that year end rally. Now, unfortunately, the rest of the market doesn’t think so. We’ve got bond yields making new highs on Tuesday. And if we look at a monthly chart of bond yields on the five year bond, you can see what’s been going on over the past couple of years. Now, typically when the Fed is tightening, they do it until something breaks. Of course, we don’t know what’s going to break. Could it be another regional bank? Could it be a major bank? Could they take an airline out? Something is going to break before the Fed stops pressing rates higher. And that hasn’t happened yet. It could be a country, it could be China. We don’t know. We’ll just have to wait and see. But you can see from the trend in yields that bond traders are getting crushed right now. And the bond market is so much bigger than the stock market.

So they’re not a happy group. And looking around the world, people are still putting money into the US dollar over other currencies. And that’s a sign of global stress. Then looking at commodities, we’ve got crude oil has been trading on a buy signal for the past couple of days. It’s been in the channel, so it hasn’t been trending higher. That could change on Wednesday as crude oil is being bid up in the premarket. And gold, which has shot up because of the tension in Israel and Gaza, it is up again in the premarket this morning. We might be heading towards that September high on Wednesday. Now going in the other direction is Copper. And if it’s a global economic barometer, it’s not pointing to a bright future at the moment. And on Tuesday, we made a lower low for the price of Copper. Now getting back to the S&P 500, we’ve been talking about this over the past couple of days. We’re stuck in a range 437.50 at the high and 429.69 at the low. And that’s the range for the past couple of weeks. We are looking to retest the bottom or the top of the open gap, the bottom of that bar, which is at 438.43, we got as high as 438.14 yesterday.

So again, we were unable to close that gap. Now, if we can close the gap and move higher, not just close the gap and move lower, but close the gap and move higher, then the next two lines come into play, and that would take us potentially up to the 453.13 level. On the downside, if we break down below 429.69, then 421.88 comes back into play, and retest of the September Low would not be the worst thing in the world for the market to do before we rush in to the year end rally. Now, one of the things I watched closely is what is the market doing with micro caps and both the Venture Exchange and the iShare Microcap ETF are both still on sell signals. If we see money go back into those, that could be a sign that the market tension is starting to fall. Now looking at the TSX most active and we won’t go through them all, but here’s Enbridge, the most actively traded Canadian stock yesterday. The first thing you should visually just draw without drawing them on the screen, but just visually, you should see a series of lower highs and lower lows, and that is a very bearish chart pattern.

So it’s going to take a lot to change that for this particular stock or any stock that looks like this for that matter. Energy stocks continue to push higher on Tuesday, so no change there. For a TOU, we are looking for $75 as our next price target to the upside. Then looking at banks, the TD Bank, which has looked like the strongest of the Canadian banks over the past few months is on a buy signal right now that is not true for the Royal Bank or for the Bank of Nova Scotia. And the Bank of Nova Scotia, of course, has looked like the weakest Canadian bank over the past few months. Gold stocks got another bid in yesterday, continue to move higher. If you’re trading Kinros, we hit 7.23 yesterday. So 7.42, 7.62 are the next two targets to the upside. And then Air Canada looking very similar to the US Airlines at the moment, having an inside day yesterday, and I wouldn’t be surprised if it continued to trade lower on Wednesday. Let’s move from Toronto to New York. The most actively traded US stock yesterday was Bank of America. We made a new closing high for this move on Tuesday.

Then looking at Tesla, Tesla is coming into earnings on a sell signal. That would change on Wednesday with a close above 261.02. Then looking at Southwestern energy, big pop there yesterday, a lot of energy stocks popping on Tuesday. Nvidia, on the other hand, went in the opposite direction. We are now back on a sell signal. If you were trading NVIDIA, you took profits at 468.75, congratulations. We are trying to take another run at 500, but it doesn’t look like that’s going to happen on this move. Then looking at Organon, we are back on a sell signal as of Tuesday’s close. Then looking at Apple, Apple traded through the lower channel line on Tuesday, but did not close below it. Very bearish-looking chart there with looks like we put in a lower high on Thursday. Then on Wednesday, we’re looking for a close below $175.62. We did hit our next price target of 181.25. So far you’ve been able to lock in some profits at that level. Then looking at Palantir, still on a buy signal, no change there. Then looking at Advanced Micro Devices, yes, we traded through the lower channel line, but we did not close below it.

That would change on Wednesday with a close below $103.83. Last up this morning, American Airlines is still on a sell signal, no change. From what we’re seeing in the premarket this morning, wouldn’t be surprised if it made a new low on Wednesday. Okay, folks, that is all for this morning’s presentation, looking for a little selling in the overall market on Wednesday morning. Have a great day. Next time you’ll hear my voice is on Thursday morning.

Stephen Whiteside

Wednesday, October 18, 2023

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