We publish on a 3-day a week schedule:
– SKIP MONDAY <– No Macro Minute Video Sunday or First Word Monday due to Travel
– SKIP TUESDAY
– Wednesday
– SKIP THURSDAY
– Friday
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-71-1024x674.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-72-1024x489.png)
______________________________________________________________
We discuss: how there are multiple reasons to believe this baby rally is gaining strength. Foremost is a Fed which is beginning to be forward looking. But there are structural reasons to believe a tradable low is in place.
Please click below to view our Macro Minute (Duration: 6:20).
______________________________________________________________
Equities have managed to gain for 4 consecutive days with cumulative gains week to date of ~5%. As we noted earlier this week, of the 9 key macro events (plus AAPL -0.43% ), only a few needed to go right for stocks to reverse the many key macro reports. And indeed, incoming macro developments have been favorable in a way that, in our view, sets the stage for stocks to gain in the near-term. So far, it is a “baby rally” but this could turn into a larger rally.
- The key remaining macro data point is the October employment report released Friday at 8:30am ET.
– The Street is looking for +180k and avg hourly earnings +0.3% MoM.
– Softer side (below +180k) would be unequivocally positive
– But even a slightly “hot” number will not necessarily be negative - Why? The October ISMs manufacturing and services, reported this week, both showed a downtick in the employment indicators, so the labor market is showing signs of softening. Thus, the only real risk is a very strong jobs number — something >200k.
- There are a few structural reasons to expect stocks to have some positive traction in coming weeks:
– first, the % stocks >200 dma (moving avg) fell to 23% on 10/30 and 25% on 10/31
– this is a bottom decile reading since 1994, median 6M gain is +9.7% with 80% win-ratio
– second, Nasdaq 100 had 15 consecutive days 5D return was negative
– only 14 times since 1985. ex-dotcom, median 12M gain +19%, 91% win-ratio - These are meaningful quantitative/structural arguments for why a durable bottom was formed in late October. And if so, this is a case for this “baby rally” to strengthen. The jobs report, however, is important.
- This week, we also believe the Fed made a visible shift away from “data dependence” as Fed Chair Powell made several comments, which we saw as a move away from data dependence:
– He spoke of consumer inflation expectations in a “good place” despite a rise in U Mich
– He hinted that 1-2 further hikes may not be where the committee is now
– He spoke of being patient moving forward
– He said “wages not a driver of inflation” and listed short-term factors
– He generally came across as dovish - Long-term interest rates have made a meaningful move lower as the 10-year broke down from the prior range and at 4.674%, is off the >5% levels of a week ago. This is progress but a move below 4.5% would be more convincing.
- October was the end of “tax loss harvesting” and as we previously noted, this also hit bonds as many govt and corporate bonds saw sizable losses. This selling pressure is largely over and coupled with negative positioning, favors stocks to drift higher.
- Another sign of easing anxiety in equities is the drop in the VIX. It is currently 15 and moved below the 200 dma earlier this week. To me, subjectively, the Israel—Hamas war heightened investor anxiety about escalation of conflict and also the personal nature of the war. This seems to have ebbed. Even my news feeds and conversations seems to have less intense focus of the war this past week.
BOTTOM LINE: The case for a “baby rally” has strengthened this week
The case for the rally strenghtened this week. But Friday jobs is a big deal.
- We still favor FAANG/Technology into YE, particularly given the decline in interest rates
- We expect market breadth to improve, which means IWM 0.59%
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-24.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-26.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-28.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-27.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-29.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-30.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-31.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-32.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-33.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-34.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-35.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-36.png)
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn.fundstrat.com/wp-content/uploads/2023/11/image-37.png)
Key incoming data November
11/01 9:45am ET S&P Global PMI October FinalTame11/01 10am ET JOLTS Job Openings SeptemberMixed11/01 10am ET October ISM ManufacturingTame11/01 10am ET Treasury 4Q23 Quarterly Refunding Press ConferenceTame11/01 2pm ET FOMC Rate DecisionDovish11/02 8:30am ET: 3Q23 Nonfarm ProductivityTame- 11/03 8:30am ET October Jobs Report
- 11/03 10am ET October ISM Services
- 11/07 9am ET Manheim Used Vehicle Index October Final
- 11/10 10am ET U. Mich. November prelim Sentiment and Inflation Expectation
- 11/14 8:30am ET October CPI
- 11/15 8:30am ET October PPI
- 11/15 8:30am ET November Empire Manufacturing Survey
- 11/15 8:30am ET October Retail Sales Data
- 11/16 8:30am ET November New York Fed Business Activity Survey
- 11/16 8:30am ET November Philly Fed Business Outlook Survey
- 11/16 10am ET November NAHB Housing Market Index
- 11/17 9am ET Manheim Used Vehicle Index November Mid-Month
- 11/21 2pm ET Nov FOMC Meeting Minutes
- 11/22 10am ET: U. Mich. November final Sentiment and Inflation Expectation
- 11/24 9:45am ET S&P Global PMI November Prelim
- 11/27 10:30am ET Dallas Fed November Manufacturing Activity Survey
- 11/28 9am ET November S&P CoreLogic CS home price
- 11/28 10am ET November Conference Board Consumer Confidence
- 11/29 8:30am ET 3QS 2023 GDP
- 11/29 2pm ET Fed Releases Beige Book
- 11/30 8:30am ET October PCE
Key incoming data October
-
10/2 10am ET September ISM ManufacturingTame -
10/3 10am ET JOLTS Job Openings AugustHot -
10/4 10am ET September ISM ServicesTame 10/6 8:30am ET September Jobs ReportMixed-
10/6 9am ET Manheim Used Vehicle Index September FinalTame 10/10 11am NY Fed Inflation ExpectationsMixed-
10/11 8:30am ET September PPIMixed 10/11 2pm ET Sep FOMC Meeting MinutesTame-
10/12 8:30am ET September CPIMixed -
10/13 10am ET U. Mich. September prelim 1-yr inflationMixed 10/16 8:30am ET October Empire Manufacturing SurveyTame10/17 8:30am ET October New York Fed Business Activity SurveyTame10/17 8:30am ET September Retail Sales DataHot10/17 9am ET Manheim October Mid-Month Used Vehicle Value IndexTame10/17 10am ET October NAHB Housing Market IndexTame10/18 8:30am ET September Housing StartsTame10/18 2pm ET Fed releases Beige BookTame10/19 8:30am ET October Philly Fed Business Outlook SurveyTame10/19 10am ET Existing Home SalesTame10/19 12pm ET Fed (including Powell) at Economic Club of New York10/24 9:45am ET S&P Global PMI October PrelimTame-
10/26 8:30am ET 3Q 2023 GDP AdvanceStrong 10/27 8:30am ET September PCETame10/27 10am ET Oct F UMich Sentiment and Inflation expectationTame10/30 10:30am ET Dallas Fed September Manufacturing Activity SurveyTame10/31 8:30am ET 3Q23 Employment Cost IndexMixed10/31 9am ET August S&P CoreLogic CS home priceMixed10/31 10am ET October Conference Board Consumer ConfidenceTame
Key incoming data September
9/1 8:30am ET August Jobs ReportTame9/1 10am ET August ISM ManufacturingTame9/6 10am ET August ISM ServicesMixed9/6 2pm ET Fed releases Beige BookTame9/8 9am ET Manheim Used Vehicle Index August FinalTame9/8 2Q23 Fed Flow of Funds ReportTame-
9/13 8:30am ET August CPIMixed -
9/14 8:30am ET August PPITame -
9/15 8:30am ET September Empire Manufacturing SurveyTame 9/15 10am ET U. Mich. September prelim 1-yr inflationTame-
9/18 8:30am ET September New York Fed Business Activity SurveyTame -
9/18 10am ET September NAHB Housing Market IndexTame 9/19 9am ET Manheim September Mid-Month Used Vehicle Value IndexMixed9/20 2pm ET September FOMC rates decisionMarket saw Hawkish-
9/21 8:30am ET September Philly Fed Business Outlook SurveyMixed 9/22 9:45am ET S&P Global PMI September Prelim9/25 10:30am ET Dallas Fed September Manufacturing Activity Survey9/26 9am ET July S&P CoreLogic CS home price9/26 10am ET September Conference Board Consumer Confidence
Key incoming data August
8/1 10am ET July ISM ManufacturingTame8/1 10am ET JOLTS Job Openings JunTame8/2 8:15am ADP National Employment ReportHot8/3 10am ET July ISM ServicesTame8/4 8:30am ET July Jobs reportTame8/7 11am ET Manheim Used Vehicle Index July FinalTame8/10 8:30am ET July CPITame8/11 8:30am ET July PPITame8/11 10am ET U. Mich. July prelim 1-yr inflationTame8/11 Atlanta Fed Wage Tracker JulyTame8/15 8:30am ET Aug Empire Manufacturing SurveyMixed8/15 10am ET Aug NAHB Housing Market IndexTame8/16 8:30am ET Aug New York Fed Business Activity SurveyNeutral8/16 2pm ET FOMC MinutesMixed8/17 8:30am ET Aug Philly Fed Business Outlook SurveyPositive8/17 Manheim Aug Mid-Month Used Vehicle Value IndexTame8/23 9:45am ET S&P Global PMI Aug PrelimWeak8/25 10am ET Aug Final U Mich 1-yr inflationMixed8/28 10:30am ET Dallas Fed Aug Manufacturing Activity SurveyTame8/29 9am ET June S&P CoreLogic CS home priceTame8/29 10am ET Aug Conference Board Consumer ConfidenceTame8/29 10 am ET Jul JOLTSTame8/31 8:30am ET July PCETame
Key incoming data July
7/3 10am ET June ISM ManufacturingTame7/6 8:15am ADP National Employment ReportHot7/6 10am ET June ISM ServicesTame7/6 10 am ET May JOLTSTame7/7 8:30am ET June Jobs reportMixed7/10 11am ET Manheim Used Vehicle Index June FinalTame7/12 8:30am ET June CPITame7/13 8:30am ET June PPITame7/13 Atlanta Fed Wage Tracker JuneTame7/14 10am ET U. Mich. June prelim 1-yr inflationMixed7/17 8:30am July Empire Manufacturing Survey7/18 8:30am July New York Fed Business Activity Survey7/18 10am July NAHB Housing Market Indexin-line7/18 Manheim July Mid-Month Used Vehicle Value IndexTame7/25 9am ET May S&P CoreLogic CS home priceTame7/25 10am ET July Conference Board Consumer ConfidenceTame7/26 2pm ET July FOMC rates decisionTame7/28 8:30am ET June PCETame7/28 8:30am ET 2Q ECI Employment Cost IndexTame7/28 10am ET July Final U Mich 1-yr inflationTame
Key data from June
6/1 10am ET May ISM ManufacturingTame6/2 8:30am ET May Jobs reportTame6/5 10am ET May ISM ServicesTame6/7 Manheim Used Vehicle Value Index MayTame6/9 Atlanta Fed Wage Tracker AprilTame6/13 8:30am ET May CPITame6/14 8:30am ET May PPITame6/14 2pm ET April FOMC rates decisionTame6/16 10am ET U. Mich. May prelim 1-yr inflationTame6/27 9am ET April S&P CoreLogic CS home priceTame6/27 10am ET June Conference Board Consumer ConfidenceTame6/30 8:30am ET May PCETame6/30 10am ET June Final U Mich 1-yr inflationTame
Key data from May
5/1 10am ET April ISM Manufacturing (PMIs turn up)Positive inflection5/2 10am ET Mar JOLTSSofter than consensus5/3 10am ET April ISM ServicesTame5/3 2pm Fed May FOMC rates decisionDovish5/5 8:30am ET April Jobs reportTame5/5 Manheim Used Vehicle Value Index AprilTame5/8 2pm ET April 2023 Senior Loan Officer Opinion SurveyBetter than feared5/10 8:30am ET April CPITame5/11 8:30am ET April PPITame5/12 10am ET U. Mich. April prelim 1-yr inflationTame5/12 Atlanta Fed Wage Tracker AprilTame5/24 2pm ET May FOMC minutesDovish5/26 8:30am ET PCE AprilTame5/26 10am ET U. Mich. April final 1-yr inflationTame5/31 10am ET JOLTS April job openings
_____________________________
36 Granny Shot Ideas: We performed our quarterly rebalance on 10/18. Full stock list here -> Click here
______________________________
PS: if you are enjoying our service and its evidence-based approach, please leave us a positive 5-star review on Google reviews —> Click here.
![Case for baby rally to continue strengthened this week. But October jobs report key (Friday)](https://cdn2.fsinsight.com/wp-content/uploads/2023/09/image-255.png)