Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Stocks Hit All-Time Highs As Rally Continues

By Michael LebowitzStock MarketsOct 22, 2021 07:30AM ET
www.investing.com/analysis/stocks-hit-alltime-highs-as-rally-continues-200605981
Stocks Hit All-Time Highs As Rally Continues
By Michael Lebowitz   |  Oct 22, 2021 07:30AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

After six exciting green days, stocks hit all-time highs on Thursday as the rally continues. This morning, futures are softer following weak earnings reports from Snap (NYSE:SNAP) and Intel (NASDAQ:INTC).

SPX Daily Chart
SPX Daily Chart

Earnings continue to dominate the news feeds and push individual stocks and markets around. Expect those stocks with earnings announcements to have larger than normal moves. Jerome Powell speaks this morning at 11 am ET. Pay attention to whether or not he sticks with the plans for QE as the recent Fed minutes discuss.

We suspect he will.

What To Watch Today

Economy

At 9:45 ET this morning we will see:

Earnings

Pre-market

  • 6:30 a.m. ET: Honeywell International (NASDAQ:HON) to report adjusted earnings of $2.00 per share on revenue of $8.64 billion
  • 6:55 a.m. ET: VF Corp (NYSE:VFC) to report adjusted earnings of $1.15 per share on revenue of $3.50 billion
  • 7:00 a.m. ET: American Express (NYSE:AXP) to report adjusted earnings of $1.77 per share on revenue of $10.54 billion
  • 7:00 a.m. ET: Schlumberger (NYSE:SLB) to report adjusted earnings of 36 cents per share on revenue. of $5.94 billion

Courtesy Of Yahoo

Market Getting Very Overbought Near Term

Very shortly, we will be releasing our Money Flow Indicator for all RIAPRO users. However, for now, I wanted to show you the current setup which is suggesting the current market rally may be approaching a short-term peak, and consolidation, following the recent run.

SPY Advanced Indicator
SPY Advanced Indicator

While the index has not turned negative yet, it is currently at a very high level. Normally, such positioning suggests more limited upside to markets near term. As you will notice, not all signals immediately result in a rally or correction, however, more often than not, the signals are worth paying attention to.

Federal Reserve Trading Policy

With the cat out of the bag, and many high-ranking Fed officials caught actively trading the markets with inside knowledge of what the Fed would say and/or do, the Fed is finally taking action. Per the press release below, Fed members are now subject to a number of strict rules that will greatly limit their ability to trade markets. For what it’s worth, the banks they regulate have had trading rules in place, like the ones below for decades.

Press Release
Press Release

Tight Labor Market Leading To Higher Wages – More Inflation

“People are quitting low-paying jobs for higher-paying jobs. They are quitting great jobs for even better jobs. People are quitting to become their own boss. People are quitting because they don’t actually need the income.

To summarize, workers are not only quitting at historically high rates, but they’re also being increasingly choosy about picking their next jobs. The tight labor market is creating a self-reinforcing loop: Demand is strong, and prices are rising everywhere, but so are wages, as desperate employers trip over themselves to hike pay in a bid to retain and attract talent.” – YahooFinance

Percent Change, Annual Rate
Percent Change, Annual Rate

It is worth noting there is an almost PERFECT correlation between incomes and economic growth. When wages rise, particularly when that increase is fast, it has preceded economic slowdowns.

Rising Compensation & The Economy
Rising Compensation & The Economy

With Q3 GDP dropping sharply, and Q4 unlikely to accelerate much, high wages will continue to pressure economic growth slower. As a consequence, employers will begin to reduce CapEx, employment, etc. in order to protect profitability. (Also why stock buybacks are at a record.)

Philly Fed

The Philadelphia Fed Manufacturing index came in below expectations at 23.8 down from 30.7 in October. However, the details were not as bad as the headline. Employment, new orders, and the 6-month outlook for capital spending all rose.

The index is composed of indicators that tend to lag economic activity and ones that lead economic activity. The graph below, courtesy of Nordea, shows how the difference between the leading and lagging indicators leads the broader index by about 10 months. As shown, the leading-lagging differential portends the index will fall back into economic contraction in the coming months. This chart affirms the sharp deceleration in growth currently being forecasted by the Atlanta Fed GDPNow.

Leads By 10 Months
Leads By 10 Months

Third Quarter Earnings Pageant Continues

$BITO is Not Perfect

Subscribers have asked our thoughts on the new Bitcoin ETF, the ProShares Bitcoin Strategy ETF (NYSE:BITO) as a substitute for Bitcoin. The biggest drawback appears to be the cost structure is not as friendly as owning Bitcoin. First, the ETF’s management fee is 0.95%. Second, and this is a flaw with many commodity ETFs, holders pay to “roll” contracts. BITO is fully invested in the October Bitcoin futures contract. Accordingly, they will have to buy the November contract and sell October. Currently, the November contract is trading at a premium of 1.27% to the October price. If the futures curve remains steep, holders of BITO will pay 15% or more annualized to roll contracts. Including the management fee, BITO could underperform Bitcoin by nearly 20%. Obviously, that estimate will change based on the shape of the futures curve.

Oil CAPEX Declining

On Tuesday we shared a WSJ article that discusses the lack of investment in energy exploration (CAPEX). We just stumbled upon the graph below which shows the problem has been brewing for about five years. Political and economic incentives favor green energy, leading us to believe that unless oil prices stay at current levels or higher and can sustain such levels, there is little reason to expect investment to pick up.

Energy Capex
Energy Capex

Stocks Hit All-Time Highs As Rally Continues
 

Related Articles

Michael Kramer
NASDAQ Could Fall Another 13% By Michael Kramer - Jan 28, 2022 56

This article was written exclusively for Investing.comThe NASDAQ Composite has fallen sharply to start 2022, down nearly 13%. But don't expect the index to race back to record...

Stocks Hit All-Time Highs As Rally Continues

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email