The Big 5 Problems Crashing Stocks (September 25th-September 29th)
September 18-September 22, 2023 by Adit Dayal for RIPPYGLOBAL.
Happy Sunday everyone and welcome back to the Rippy Global weekly outlook. The market basically died last week, down a good 3%, scaring investors but also setting up some amazing setups for us this week!
Let’s take a look at what this week has in store!
This weekend I read about the upcoming “five point threat” to the US economy. Let’s dive a little bit deeper into this and what it can mean for the markets.
Powell mentioned a few things, and called them “uncertain” in his speech last week, and there’s nothing the market hates more than uncertainty. He mentioned a strike, a government shutdown, resumption of student loan payments, higher long term rates, and the oil price shock.
- The auto group shock has already been hitting supply in the industry, although the UAW president did mention Ford has been making progress.
- The possibility of a government shut down is barely a week away and if they do shut down, expect a slowdown of these reports in October.
- Student loan payments resume in October with the median payment being $25K! This can hit consumer spending hard in my opinion, making stocks like Starbucks a short.
- The Fed’s dot plot has now signaled the possibility of one more rate hike, driving the higher for longer narrative even stronger.
- OPEC and Russia continue to cut oil production, drastically driving down our supply and hurting the wallets of US consumers.
The higher for longer narrative is one that has been thrown around the internet for a bit, but now might have a bit of substance to it after Powell’s conference on Friday where the possibility is looking more likely. Mortgage and home stocks are falling as demand for mortgages and homes will likely slow down, just like I mentioned a few weeks ago in our newsletter.
Bank of America released a report this week which highlights the importance of news and sentiment on stocks. According to BofA, Growth stocks in August with positive news outperformed by ~6% versus negative. They used their quant models to run a screen for stocks with good sentiment and $WDAY was one of them (they have an event on Wednesday). Some others were $SNPS while negative names included $ETSY $DAR and $ALLY.
Nike has earnings this week, their stock is down ~20% this year due to issues in China and more, but this earnings could be the one where they turn around. In my opinion, brand value isn’t as strong as it once was in the COVID sneaker days, but it hasn’t lost its status as the darling of the sneaker world. The question is if macro (the big 5 I mentioned above) will hinder their growth to a point where cheaper shoe companies like Sketchers take over market share significantly.
#1) Earnings week is super boring this week. Nike will move the retail stocks a bit, but nothing else that’s noteworthy of coverage in my opinion.
#2) On Monday, Huawei is hosting an investors day. It’s also the first day of trading of what was a massive selloff last week, so I will be watching fro initial week positioning
#3) On Tuesday, Microsoft is begging to release their AI for Windows and Workday $WDAY has an investors day event.
#4) On Wednesday, META will host a product event where Mark Zuckerberg will speak.
#5) On Friday, Tesla analysts will release their delivery estimates for Q2. Tesla tends to move with delivery news in the past based on what I’ve noticed.
The S&P 500 ($SPX index) has sold off hard and I see a new opportunity coming up for a possible trade. The 200DMA is right there and there is a retest of breakout. The 0.618 Fibonacci Retracement also lines up with the channel.
My key breaks are $4180 for bulls (dip buy) and $4050 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
Tesla is in an interesting spot here and, like I mentioned earlier, I think Q2 delivery estimates will guide us in the upcoming direction for where this name will go. After a solid rally, we know there is market interest, but what I’ve noticed is that the more eyes on it to go up, when disappointment sets in, it will dump faster.
Apple is still holding that key support level (somehow) in this head and shoulders pattern, and it we lose the main support everyone is watching, keep an eye near $170 for a trap because there is also a lot of buying pressure there.
Coinbase and crypto names have not been strong whatsoever and this name is breaking down from this bear flag. As one of the most risk on stocks, I think this has room down to its next support at $65. Traders are selling calls on this stock as well which is a bearish sign.
In terms of insider trades, ASAN has been hit repeatedly for months now and is one I will be keeping my eye on.
Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)