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Cisco Systems, Inc. (CSCO) manufactures and sells Internet Protocol-based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China. The company serves businesses of various sizes, governments, public institutions, and service providers. CSCO had a strong end to fiscal …
Friday’s jobs report for September showed a decrease in monthly gains, with 263,000 new jobs added last month, a decline from the prior month in which 315,000 new jobs were added.
The deep impact it had on almost every asset class in the financial markets was not because of the tepid numbers but rather hopes by the Federal Reserve that these numbers would be even lower.
The Federal Reserve had hoped that Friday’s report would reveal even slower growth because that would indicate progress by the Federal Reserve in reducing inflation.
Inflation is still greatly elevated at a 40-year high even after the Federal Reserve has raised interest rates at every FOMC meeting since March. The Fed raised rates by 25 basis points in March, 50 basis points in May, and 75 basis points in June, July, and September. The Fed took their benchmark Fed funds rate from between 0 and 25 basis points in February to between 300 and 325 basis points in September.
Although Friday’s report indicated slowing job growth it is believed that this contraction is not enough for the Federal Reserve to slow down its current pace of interest-rate hikes.
According to CME’s FedWatch tool, the previous week there was a 56.5%% probability, last week there was a 75.2% probability which Friday swelled to an 82.3% probability that the Federal Reserve will raise rates by 75 basis points for the fourth consecutive time at the November FOMC meeting. This probability indicator forecast the probability of FOMC rate moves by using the 30-day Fed Funds futures pricing data.
Friday’s report had a profound effect on U.S. equities. As of 2:35 PM EDT, the Dow is currently trading off by 661 points a decline of 2.22%. The NASDAQ is currently down 3.75% a decline of approximately 415 points, and the S&P is down 106.16 points or 2.90%.
Friday’s report also had a deep impact on gold pricing which opened at $1721 and then traded to a high of $1722.80 before the release of the report which took gold futures basis the most active December contract to today’s low of $1698.40. Gold futures did recover trading to approximately $1714 a few hours after the release of the report. However, as of this writing at 3:20 PM, EDT (Friday) over the last hour gold has been trading between $1702 and $1706.
So, what does this mean for the future of gold pricing? I believe that although this report is extremely important in an exceedingly important data set that the Federal Reserve will use at their November 2 FOMC meeting, it will be this week’s CPI inflation report for September that will be much more significant.
But in terms of the long-term effect of the Federal Reserve on gold pricing, it is highly likely that if the Fed continues to raise rates and inflation remains persistent at some point market participants will have to focus on the high level of inflation rather than being laser-focused on rising rates. If that assumption is correct, it could take gold dramatically higher. But it is also likely that there will be more pain ahead.
Our technical studies indicate that the first level of resistance occurs at $1710 the 23.6% Fibonacci retracement which is based on a very short-term Fibonacci retracement data set from September 28 to October 7. Major resistance occurs at $1738 the recent high of the rally which began after gold hit its lowest value in years at $1621. The first level of support occurs at $1693.80 the 38.2% Fibonacci retracement and then at $1689.40 a 42% retracement.
For those who would like more information simply use this link.
Wishing you, as always good trading,Gary S. WagnerThe Gold Forecast
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The Fed’s tightening puts hard pressure on the broad stock market and chip makers are not the exception. The strong labor market statistics and ongoing inflation pressure supports the hawkish mode.
If one thinks that the sell-off might be over, there is a chart below that I spotted a disastrous model for a well-known chip maker Advanced Micro Devices, Inc. (NASDAQ:AMD).
You definitely know this chart pattern I spotted for you. It is a Head & Shoulders reversal model. Last time this notorious chart pattern appeared in my posts was in May on the chart of Ethereum cryptocurrency. I updated it for you below to illustrate the historical sample.
As soon as the price crossed below the Neckline beneath $2,400, Ethereum collapsed as it had lost a tremendous 66% down in the valley of $884 in June from the post level of $2,564.
This is how this model has played out before and that is what we could expect in the next chart of AMD below.
The Head & Shoulders pattern (pink) here is more balanced compared to up-sloped model in the Ethereum chart. The Neckline touch points are located almost exactly at the same level of $72, hence it is a flat line. The Head is quite tall above the wide Left Shoulder and the narrow Right Shoulder. The top of a latter offers a strong resistance and the invalidation point.
The 52-week moving average (purple) fortifies the above mentioned resistance as it is located in the same area.
The price has already crossed down the Neckline of $72 and the collapse only accelerated. The target rule requires us to subtract the height of the Head from the Neckline, this math results in a negative number of minus $21. The stock price can’t go negative; thus it means the total annihilation of AMD price as it was earlier indicated for Ethereum.
Indeed, the latter fell sharply, however, its price has still four digits not a single-digit. Instead of a doomed target, I highlighted two supports in the chart to watch.
The next support is located in the area of 2018-2019 tops and 2020-year valley at $34. Currently, this price tag corresponds to the book value of the stock. Amazing coincidence of technical and fundamental levels.
The last support in the double-digit area is located at the top of the 2017-year and valley of a 2018-year at $16.
AMD announced preliminary third quarter 2022 financial results last week. According to a press release from the company, revenue is anticipated to be $5.6 billion, which is much less than the initial prediction of $6.7 billion.
“The PC market weakened significantly in the quarter,” said AMD Chair and CEO Dr. Lisa Su. “While our product portfolio remains very strong, macroeconomic conditions drove lower than expected PC demand and a significant inventory correction across the PC supply chain.”
Aibek BurabayevINO.com Contributor
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.