Hope your weekend went well! Here is a quick recap of Markets for the Week of October 13th, 2023 and what we are watching this week 👨‍🏫

Third quarter earnings season began Friday morning with reports from some of the nation’s largest banks including J.P. Morgan, Wells Fargo, and Citigroup. The results were broadly better than expected and illustrated resilient profitability in the face of economic uncertainty.

This earnings season may mark the end to the recent earnings recession that began in 4Q22, with margin pressures easing sequentially and earnings growth broadening out across sectors.

The Magnificent Seven stocks (the 7 largest companies in the S&P 500: Apple, Microsoft, Alphabet, Nvidia, Amazon, Meta, Tesla) are expected to carry the bulk of earnings growth this quarter, with estimates for a +35% revenue growth and +200% earnings growth YoY.

Over the past 10 years companies have exceeded earnings expectations 73% of the time by an average of 6.4%, according to FactSet.

Here are the key points from last week:

• Israel declared war on Hamas - Hamas (the Islamist political and military group that governs the Gaza Strip) invaded Israel on Saturday, October 7, in a surprise terror attack killing more than 1300 Israelis and taking hostages.

  • Israel’s military eliminated all Hamas fighters within their borders and have since begun a “complete siege” of Gaza, killing 1,500 Palestinians as the IDF targets Hamas personnel and military assets.

  • Israel warned 1.1 million residents in the northern Gaza Strip to evacuate within 24 hours, which is presumably a pretense to a ground attack in Gaza that will escalate the war.

• US September Inflation reports- were not as friendly as investors envisioned. This marked an interruption in the disinflation seen in producer prices, which will keep market participants worried about pass-through effects to the consumer and rates staying higher for longer because inflation is higher than the Fed would like.

  • Consumer Price Index (CPI) increased 0.4% on the month and 3.7% from a year ago on a headline basis, above respective forecasts for 0.3% and 3.6%.

    • CPI is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers.

  • Producer Price Index (PPI) increased 0.5% on a month over month basis, against estimate for a 0.3% rise. The headline reading on a year over year basis increased 2.2%, which is the largest move since April.

    • PPI is a family of indexes that measures the average change over time in the prices received by domestic producers of goods and services.

• Oil prices spike Prices are heavily influenced by the Israel-Hamas war, which could possibly involve other countries rich in oil supply, such as Iran.

$SPY: The S&P 500 traded to our 438 price target last week before pulling back as geopolitical angst mounted on Friday followed by the US dollar and Crude Oil rising. We are in the middle of a short term downtrending channel so can go either way really depending on some of the big names earnings.

If Bulls fail to reclaim and hold 440-445 resistance the hedge play setup we wrote about a couple of weeks back is on. See video here

$QQQ: traded and rejected 372 which was previous support in September now turned resistance. It to is in a short-term downtrending channel, if 360 doesn’t serve as support and some of the big names surprise with earnings misses, look out below.

Main support comes in at 355 but this would be its 4th attempt to hold. The more times it tests, the weaker that support gets. The video also speaks about trading QQQ to the downside.

I do a weekly Markets analysis every Monday during “Office Hours” 8:30pm EST via zoom for the Ceni Capital Community stop by, say Hi and check it out. All are welcome.

🚗 $TSLA: is reporting earnings on Wednesday after the close, how will lowering prices affect their margins is what shareholders will be watching. Tesla has been in a $30 trading range since August $240 - $270; bullish above, bearish below.

📺 $NFLX: Netflix is also reporting earnings on Wednesday after the close. It’s in a steep falling wedge down over 20% since disclosing that their ad business is not material yet to its overall revenue. Needless to say investors are scared at what Netflix will say regarding its ad revenue as the stock gave back all its gains since May. Great dip buy opportunity or some more pain ahead?

💾 $SMH: Semiconductors ETF rejected that 152 resistance last week and formed a big engulfing bearish candle on Friday testing 148 support. Spoke about hedging this sector in Office Hours last week and how to play a possible 10% pullback via SOXS

$SOXS: Semi's bearish 3x leveraged ETF has room to 12, 13.50 and 15 if SMH pullback to 130.

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See you next week! 👋