Markets Rebound Behind Growing Fed Interest-Rate Cut Expectation
Markets are recovering today
Following one of the worst trading days in recent history, markets are recovering today with all three major U.S. indices on track to close with slight gains. Underwhelming economic reports and political unease have pressured markets this week while optimism for another interest rate cut by the Fed continues to grow. Following the World Trade Organization ruling, the U.S. has announced additional tariffs on $7.5 billion European goods; next week look for U.S.-China negotiations to resume. Short-term support for the SPY is at $282 and we believe the market is range-bound.
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SPY Seasonal Chart
We do not see the potential for the market to overshoot all-time high with the SPY currently trading between $282-294. We will look to buy when SPY is near $282 and sell near $294. Further volatility is expected and we encourage maintaining clearly defined stop levels for all positions. For reference, the SPY Seasonal Chart is shown below:
Growing optimism of the rates cut moves U.S. markets higher
The three main U.S. benchmarks saw gains today after starting the day trading lower. This comes following three very volatile days with selloffs triggered by unimpressive economic data and impeachment concerns. Today, markets rebounded off growing optimism the Fed will cut rates again as most data since the last interest rate cut has underwhelmed.
The latest release saw the health of the service sector dip while weekly jobless applications rose last week. With several key reports and events scheduled ahead of the next FOMC, look for more developments on both domestic and global fronts to dictate markets. Next week, several key reports are due including FOMC minutes, Core CPI, and October’s Consumer Sentiment Index. Also taking place next week, U.S. and China trade representatives are scheduled to meet in D.C.
Next week’s meeting between the U.S. and China will be the first formal talks since additional tariffs were delayed. While an official deal may not be brokered during this meeting, clarity regarding tariffs and further negotiations will be key for market sentiment. Several tariffs are set to resume in December while tensions between the two nations in recent days have eased. Globally, both Asian and European markets closed to mixed results. Over in the U.K., Brexit tension remains prominent with the new Prime Minister trying to broker a deal before the upcoming exit from the E.U. deadline.
Using the “^GSPC” symbol to analyze the S&P 500 our 10-day prediction window shows mixed signals. Today’s vector figure of -0.65% moves to -1.10% in five trading sessions. Prediction data is uploaded after the market close at 6 p.m. CST. Today’s data is based on market signals from the previous trading session.
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Highlight of a Recent Winning Trade
On September 27th, our ActiveTrader service produced a bullish recommendation for Nike Inc (NKE). ActiveTrader is included in all paid Tradespoon membership plans and is designed for day trading.
NKE entered its forecasted Strategy B Entry 1 price range $92.17 (± 0.50) in its first hour of trading and passed through its Target price $93.09 in the first hour of trading the following trading day. The Stop Loss price was set at $91.25.
Friday Morning Featured Symbol
*Please note: At the time of publication we do own the featured symbol, ITB. Our featured symbol is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader or MonthlyTrader recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
Our featured symbol for Friday is U.S. Home Construction Ishares ETF (ITB). ITB is showing a confident vector trend in our Stock Forecast Toolbox’s 10-day forecast. This symbol is assigned a Model Grade of (B) indicating it ranks in the top 25th percentile for accuracy for predicted support and resistance, relative to our entire data universe.
The symbol is trading at $42.63 at the time of publication, up 0.14% from the open with a -0.22% vector figure.
Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
Note: The Vector column calculates the change of the Forecasted Average Price for the next trading session relative to the average of actual prices for the last trading session. The column shows the expected average price movement “Up or Down”, in percent. Trend traders should trade along the predicted direction of the Vector. The higher the value of the Vector the higher its momentum.
West Texas Intermediate for Crude Oil delivery (CL.1) is priced at $52.29 per barrel, down 0.66% from the open, at the time of publication.
Looking at USO, a crude oil tracker, our 10-day prediction model shows mixed signals. The fund is trading at $10.91 at the time of publication, down 0.64% from the open. Vector figures show +0.08% today, which turns -1.15% in five trading sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
The price for the Gold Continuous Contract (GC00) is up 0.32% at $1,512.80 at the time of publication.
Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows mixed signals. The gold proxy is trading at $142.04, up 0.55% at the time of publication. Vector signals show +0.02% for today. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
The yield on the 10-year Treasury note is down 3.96% at 1.54% at the time of publication. The yield on the 30-year Treasury note is down 2.12% at 2.04% at the time of publication.
Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see positive signals in our 10-day prediction window. Today’s vector of +0.82% moves to +1.28% in three sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
The CBOE Volatility Index (^VIX) is down 5.16% at $19.5 at the time of publication, and our 10-day prediction window shows negative signals. The predicted close for tomorrow is $18.69 with a vector of -6.85%. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.