Market Radar 2. November 2022

Did we see temporary exaggerations of the cops?

The SPY only scratched the 390 mark in the first 5 minutes of trading on Tuesday. After that, the prices fell back towards the 380 mark and found a stop around 383. From 17:00 to 21:00 German time, the SPY oscillated in a narrow range just below 386 and just above 384.

Jerome Powell speaks after 7 p.m. German time

From 7 p.m. today, the US Federal Reserve will most likely raise interest rates by 75 basis points. It is quite unclear what Jerome Powell will say in the subsequent press conference in front of US journalists. His words will largely determine the direction in which the S&P 500 will move by the end of the trading day.

What can we observe under the radar of major US stock indices?

Four industries are upgraded to “bottoming out or sideways” for today: copper and gold mines, lithium and utilities. These are all sectors that have recently shown relative weakness vis-à-vis the market as a whole. Now they line up where the “pack formation” is currently taking place: 29 of the 56 industries I observed receive the day stamp “Bottoming or Sideways”.

Only two industries receive the daily stamp “wait and see or speculate on sell-off”: China Tech and Social Media.

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Bottoming: Fragile or stable?

The fact that many stocks are currently in the phase of bottoming out can also be seen from the reaction to the quarterly figures. Slightly positive outlooks are enough to allow equities to rise by double digits in some cases. If the fundamentals are correct, this could be seen as constructive for the soil formation project. Otherwise, there could also be a temporary exaggeration of the bulls.

A few examples:

The specialist for veterinary medicine, Idexx Laboratories (IDXX), reported quarterly figures yesterday before the market and was able to increase almost 10%. For this strong breakout, quarterly figures were sufficient, which were slightly above estimates in terms of profit. The outlook for revenue and earnings slightly undercut the company’s previously forecast margins. If such figures, let’s say satisfactory, can lead to such a price jump, then one could assume that the bottoming out is now on a solid basis due to long-term good fundamental prospects in the company.

So my pre-earning bet in Idexx Laboratories (IDXX) paid off. The stock is now scratching the $400 mark on the chart. I will realize my win today.

I found the reaction to the quarterly figures at the transport service provider Uber (UBER) quite blatant. Premarket on Tuesday, Uber reported a loss of $0.61 per share for the third quarter. However, analysts expected a loss of $0.17 per share. Uber blamed special charges such as the write-down of shareholdings. From a one-year perspective, sales increased by 72%, which may have been rewarded by some stock market participants. Uber, like Idexx, also rose about 10% from Monday’s closing price. At the top, the share was even able to trade 16% above Monday’s closing price for a short time yesterday. 

I suspect we saw an exaggeration of the bulls at Uber yesterday, as we saw on Friday at Amazon (AMZN) – I had brought this up in the market radar. That the bull power in the Amazon share on Friday was an exaggeration and not a sustainable bull power in the downward trend, we could see yesterday on the basis of the price movement of the e-commerce giant. Under high trading volume, Amazon closed below $100 for the first time since April 2020 on a split-adjusted basis, losing more than 5% compared to Monday’s closing price.

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