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Market Outlook for Oct 9th – 13th 2023

Good Morning TTU!

Still Bullish?

IF I am to remain a bull then I need to see earnings continue to surprise.  Remember, when we bake in good news into an earnings report and it comes in “in line”, you can get pull backs.  Sentiment is what causes the quick reaction. Lower expectations allow for “in line” to have a positive impact on the price of a stock.

I won’t bore you this week with all the graphs and data I usually bring to the table.  I’ve been setting up for the Christmas rally and I was able to pay myself a good chunk of change last week.  What I didn’t take off I am setting a trail stop at entry. If this is the bottom, I want to hold for a long time. If it isn’t, I am safe now and have locked in my gains.

Jobs numbers were hot but as I said when they came out – these are adjusted and are basically fake that nobody takes them seriously.

You can see #1 is Leisure and hospitality. These are the jobs I created as a business owner of Subway, SportClips and other franchises.  I can promise you that these aren’t high paying jobs that you can easily raise a family with. The #2 is government. No matter what your politics, government jobs have to be paid for by those in the free market. If you look at the public sector jobs as a percentage of payroll gains, you can see that its never been higher. Again, this means fewer people making the money that supports these government jobs and growth in government spending.

So about 1 in 5 jobs is a government position… horrific.

The good news was average hourly earnings coming down again.

We got a bounce last week but was it simply an oversold bounce? About 98% of the time, you do not trade at the ranges we were in last week. This is why you hear people say things like “I can’t short in the hole” or “I can’t chase the short down”.  

I have no idea if the bounce will continue but I can tell you from a valuation standpoint, there are tons of companies out there that have what seem like very appealing multiples. 

When the market pulls back the bears jump out of the woods screaming the sky is falling. It is human nature and it is what I need to have happen in order for me to make money.

  • I need emotional reactions that I can buy and or short. We nailed on in COST last Friday on an intraday basis. I want to show you what it looks like for an overall value play.
  • MMM
  • You can see the  highs of 3M brought in a price to sales ratio of 5+ which is very high for a non growth company. People made excuses of why it was ok to have the high ratio. Now you can see its about 1.4.

Many people view this as a great buy right now. I have a good friend who runs a hedge fund who has invested into MMM because he believes this drawdown is overdone.

What we as investors must continually do is evaluate these ratios and figure out if they are “too high” or “too low”. Where do all these ratios come from? Earnings! I am a firm believer that earnings is what drives the markets.  You know I am strong bull and this is because I feel earnings revisions are going up and ratios still aren’t at an extreme level.

The cumulative 2023 earnings power of the top 30 weighted stocks in the SP 500 was revised UP by +10.66% in the past 60 days. 2024 estimates are UP +10.81%.

The cumulative 2023 earnings power of the top 30 weighted stocks in the Russel 2000 was revised UP by +6.32% in the past 60 days. 2024 estimates are UP +5.61%. 

If you want to see the companies on an individual basis, see below.

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