(Justin Vaughn, Editor, Options Trading Report)
Stocks rebounded Monday, with the indices showing new found confidence, after months of whipsawing, sending multiple signals. The Bear disappeared for a while…with signs that just maybe October was saying good-bye to a frightful September. Monday’s indices surged, with the Dow Jones Industrial Average adding 765 points.. The S&P 500, benchmark index, tacked on 92 points. The Nasdaq Composite followed suit. And Tuesday seemed to find the groove that investors and traders were hoping for…as stocks were up across the board. The resurgence showed in nearly all sectors as broad gains covered the board. Putting September behind and opening October with some e positiveness spurned hope that just maybe the bad news would not be ‘so bad.’ Markets did not lose steam, with traders and investors driving all indexes upward as the day finished. The Dow was up 825 points, the S&P 500 and Nasdaq posted the best 2-days gains since early 2020. Favorites, high techs all chipped in. Even Elon Musk agreed to buy Twitter for some $54.20 a share, wiping his smug face a bit, alluding to a fistfull of changes. Wednesday’s open quickly turned downward, setting the ‘tone’ for the day. Stocks slide and wiped out nice gains achieved on Monday and Tuesday…and curbing many positive previous thoughts. The two-day streak was short-lived, as more concern about interest rates and the Fed’s upcoming tightening number later this month. By day’s end the S&P 500’s eleven sectors, eight of which were down significantly. Three sectors found gains: energy, healthcare and technology. It was a yo-yo day and at the end I subscribed to scattered losers. Thursday continued the trend with a great deal of peaks and valleys. The S&P 500, and the Dow Jones Industrial Average, both fell 1% and 1.5% respectively.. The tech-heavy Nasdaq fared a bit better, dropping 0.7%.
Treasury yields stayed strong as the benchmark 10-year settled above 3.8%, and the 2-year steadied at 4.2%. Record amounts of capital have flowed into bonds and continue as the rates are very much attractive for investors looking for a safe haven. Comments from several Federal Reserve Officials soundly echo the seriousness of reducing inflation, as Loretta Mester, the Cleveland Fed President, said. “Prior to non farm payrolls (NFP) this Friday and CPI next Wednesday, the market has been oscillating between the ‘hawkish Fed’ and ‘Fed pivot’ narrative,” analysts at JPMorgan said in a note Thursday. The Labor Department’s September jobs report expected Friday could be a very big influencing factor, one way or the other.
Lithium Demand Explodes…The soaring demand has lifted Lithium prices to unheard 300% increase in just a year. Electric Vehicle manufacturing has soared as consumer demand is off the wall. Half the world’s supply is located in three South American countries: Argentina, Bolivia, and Chile, commonly referred to as the Lithium Triangle. The other half is in Australia. In one mine alone, in one mine alone production has increased from 22,000 tons to 84,000 tons since 2016 in Chile. Chile, at present, is the most productive of the ‘triangle group.’ Lithium mining uses an enormous amount of groundwater, and thus affects the environment, specifically deserts, existing lakes and lowlands. “Condersidering that it can take over a decade from mine to discovery, there is naturally a lag. Eventually investment will allow supply to catch up, but this will take time,” said Cameron Perks, senior lithium analyst at Benchmark. The Biden Administration has a goal of 50% of trucks and cars to be zero emission by 2030. 75% of lithium demand is earmarked for electric vehicles.
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RUMBLINGS ON THE STREET
Randall W. Forsyth, Writer of “UP AND DOWN WALL STREET,”of Barron’s “With the S&P 500 now threatening its June 16, low of 3666.77 and more than 1,100 points below its Jan. 3 peak, sentiment already is bearish. The key message for investors: don’t look for the Fed to come to the rescue. The central bank’s main concern now is for the economy to touch down safely on the carrier flight deck in rough seas. As dad used to say, good luck and happy landings.”
Larry Summers, Former Treasury Secretary, on the U.K. government’s defense of its tax-cut plan, Barron’s “The first step in regaining credibility is not just saying credible things.”
Jurrien Timmer, director of global marco at Fidelity Investments, Barron’s “The problem in the U.S. is that while the Fed has stopped buying Treasuries, so have other central banks, and as some central banks, such as the Bank of Japan, intervene in their currency markets, they are presumably depleting their dollar-denominated reserves.”
Doug Ramsey, chief investment officer and portfolio manager at Leuthold Group, WSJ “The blue chips tend to hold up better until the very bitter end of a bear market. They are usually the last ones to give up the ghost. I still think we have that phase ahead of us.”