First post for the StockOrbit newsletter. Lets start with last weeks economic news and why the market rallied about 300 points from 4100ish on $ES.
Nov 1st Treasury Buyback Program
Now, we knew that a bounce would be coming. I have been buying dips 2 weeks ago, and have been stop out, almost every single time. So why the massive rip last week? Janet Yellen, the Sec of Treasury for the US Government, annouced a Treasury buyback program. She annouched that she will be buying back about 100 billion in Treasury notes. This allowed investors to liquidate their Treasury Porfilio’s by having the US Government buyback their debt. This gave investors cash to reallocate, and we saw them buy equities, and yields puked. The next buyback program is scheduled to be in Jan 2024. I would be very interested to see how much the treasury department allocates for their new buyback.
Nov 1st Fed Meeting
The Fed stated that they will not be raising interest rates during their meeting, however stated that they WILL keep rates higher for longer, and continue their tightening policy.. We saw the 10 Year yield dumped around 5%, down to 4.5%ish at the end of the week. Bonds, stocks, and equities had a massives rally during this week. Was it because of the Fed? I don’t think so.
From Jerome Powell, speech we heard “Over the past three months, payroll job gains averaged 266 thousand jobs per month, a strong pace that is nevertheless below that seen earlier in the year”. The job market is STRONG! We have seen this month over month with the nonfarm payroll reports coming out during the first week of the months. We saw a massive increase in the leisure and hospitality industry. To reduce inflation, we need the job market to weaken, which is why everyone is thinking that a reccession is ahead due to this. Consumer spending must decrease, and for that to happen, we need to see weakening conditions in the job market. Jerome Powell is not letting go of the gas. Yields will continue to soar to the upside. The Fed so far as reduced their securities holdings, by about 1 trillion dollars so far.
Nov 3rd NonFarm Payroll
Wall Street was looking at these employment numbers very closey. In September, we had a massive beat to the upsides, roughly 330,000 jobs created, in industry’s that shown the consumer spending is still very high. Nonfarm payroll numbers came out to about 150,000 below estimates by about 50,000. This is what caused this huge rally at 8:30 am EST on Friday.
We broke out at around 4332, almost hitting 4400. This is a big backtest, which I am confident we will see this week. The reasoning behind the low nonfarm payroll, had a big chunk to do with the automobile strikes. About 30,000 of the jobs lost, were due to those strikes happening at the United Auto Workers union. So I wouldn’t be suprised if we sell off back to 4332 and lower.
Upcoming Week
Coming up to this new week, there are no big economic reports coming out. Price action seems bullish right now. BUT, all this price action was due to the Treasury buyback program. I expect the liquidity that was present for last week to be gone. I expect some selling happening this week, maybe hitting down to 4332. A break of 4332 is extremely bearish, and I would be looking to short downwards to the 4200s.
A break of 4332, I expect a big sell downards to 4200. You can see at 8:30 am EST, we had a massive breakout on Nov 1st. This was due to the Government buyyback program, releasing liquidity for investors. Break 4200, and we freefall. Sucks that I was on work travel and missed this whole move to the upside…. But this move is done. We can have a max move up to 4400, and dump. If this is an actual upside move, we ES has to close above 4440.