By: Tom Gentile
on February 22nd, 2023
Originally published via our newsletter previously. Subscribe for early access!
Hotter than Expected Inflation Reports Make for a Challenging Week for The Stock Market
Tuesday saw the release of the current Consumer Price Index (CPI)
Along with Retail Sales… both reports were higher than expected.
Today we saw the release of the current Producer Price Index (PPI)
These reports came in hotter / higher than expected, which resulted in the markets starting off those trading days lower as hotter than expected numbers for these show inflation is still running hotter than the Fed would like and more rates hikes are almost assured to come.
Initial jobless claims came out about a 1,000 less than anticipated showing the labor market is still holding up amidst all the Fed’s rate hikes.
This is the battle that has been going on for some time and the concern about this is that the Fed is trying to stave off inflation without spurring on a recession. Despite all this the markets haven’t sold off and we will lean bullish but prepared to trade both ways.
— Tom Gentile
C1P: Chief 1-Percenter
Corners of the Market
SPY – SPDR S&P 500
SPY gapped down almost 6-points.
It rallied throughout the day to recoup close to 5-points of that gap and then, with an hour and a half to go before market close, a sell-off occurred that wiped out all the gains it had on the day.
All that work put in by the bulls today wiped out in an hour and even the last half hour after that resulted in the SPY closing at or near its day’s low.
Quite a bearish move.
410 was a price point we were talking about possibly being an old resistance / new support price.
It now seems 405 is the support price SPY needs to hold.
TLT – iShares 20+ Year Treasury Bond ETF
I love trading repeatable patterns.
I love it when repeatable patterns bring profitable options trades.
Past result are no guarantee of future results working out the same way, but let me ask you…
Would you rather trade patterns that have shown success in the past or ones that never work?
TLT saw a roughly 8-point run higher off its previous B or bullish signal.
There is a Darknet B Bullish signal yet again on TLT.
If stocks are potentially due to roll over a bit, the inverse relationship between equities and bonds could take place and the Darknet B signal could assist in another up move.
UUP – Invesco DB US Dollar Index Bullish Fund
Last week it was pointed out UUP broke above the descending resistance line and remained there more than one day, which indicated to us the downtrend is broken.
That doesn’t mean the downtrend is officially over, but in seemed to have a better change of trading a bit higher than lower.
When that happened, it was time to assess possible resistance prices.
28 is / was a resistance for a short period of trading days and the last two trading days have traded above that price resistance on a closing basis.
The green arrows on the chart image above are what can be deemed possible resistance points.
USO – United States Oil Fund, LP
The same situation as it pertains to Darknet could play out for USO as it may also play out for TLT.
In fact, USO is already trading higher off the most recent Darknet B bullish signal.
You all have either watched me live, read a report or education in a prior newsletter about the seasonally bullish pattern in energy and oil.
We tend to use Feb. 14 as the start date of the pattern.
Though we still believe this pattern should work out over the next 5-months it is only 2-days in and today was a bearish reversal day. Try not to micro manage this pattern. We see64 as a support price. If it gets near there we will be a bit concerned.
GLD – SPDR Gold Shares
If you are curious as to where a possible target price / support price might be for GLD based on the Fibonacci tool in my software. Or you can refer to last week’s newsletter.
What I am emphasizing this week is the fact GLD broke a long-term ascending support line to the downside. Sometimes a security will fill a downside gap right away and other times it may take a longer period of time than one would think to fill the gap.
Instead of filling the gap it seems to have used 175 as a resistance and made a move down to 170. This was a previous resistance level so there is a chance now it becomes new support.
I see 175-170 as a 5-point range that may become where GLD hangs out before a break one way or the other.
Tools and Observations
One thing I have been persistent about is educating as many folks as possible on a seasonally bullish pattern I see that happens almost every year since 2007.
I have a 20+ page report one can ask for at www.tomgentile.com (go there and fill out info to then received the pdf report).
The United States Oil ETF (USO) is what I use to analyze bullish or bearish sentiment for the oil (and energy) sector.
Over the past 16 years, USO has traded higher 12 of the past 16 years. What I and my research team did was look at the start price on mid-February (we used the 14th of February open price; sometimes maybe we used a day before or after) and the closing price on mid-July (we used the 16th; sometimes due to weekends we used the trading day after or before that).
No matter what the gain amount or percentage gain amount was the USO traded higher 75% of the time or 12 of 16 years.
One can trader the security itself or other ETF’s in that sector or individual stocks in those sectors.
It is this last point I want to discuss regarding how to find stocks in this sector that might be worthy of your time.
If you know different oil ETF’s already you can search those up in the Stock Charts Page in the tools just by typing in their symbol and click Search. If they are optionable (they have listed options for them) they will be in the software otherwise they will not be in the tools.
Beings you are logged in to the tools, go to Stocks > Stock Analysis > Sectors and you will be in this page.
See image below.
There are lists of Major and Minor Sectors one can search up. Click to highlight which one you want to bring up the list of securities in those sectors lists.
If you selected a list from the Major list also make sure you selected the Major SIC sectors line item in the Sector Settings part of the page.
The last thing to do now is find the Sector Controls box a bit lower on the page.
Click the green Go button for finding optionable stocks in either the Major or Minor sector you selected above.
The list is a partial listing of the search results.
You will notice the other list next to the major is the minor sector it is classified as in the event you want to know this and search up optionable stocks in that one.
Lastly: You can take the list of stocks or some of the stocks from that list (click to put a check mark in the boxes of those you want to create a separate list with).
In the Sector Sorted List Output box select is you want to ADD the selected stocks to a new list or replace existing symbols in an existing list with the ones you just selected.
You’ll want to click on the dropdown window from the Options Analysis Lists and select one of the List #’s if you want to create a New List with these freshly selected ticker symbols.
You can then run any number of scans and see this new or newly revised list to find your opportunities.
— Tom Gentile
C1P: Chief 1-Percenter
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