Although earnings season is in full swing, trading volume has been relatively light this week. Perhaps investors are waiting for the stock market to show some direction. It could happen next week, one that’s jampacked with earnings and market-moving economic data, or the following week after the US election and Fed meeting.

A Bird’s-Eye View Of the Stock Market

Tesla’s upbeat Q3 earnings on Thursday juiced up the Nasdaq Composite ($COMPQ), the laggard of the three US broad market indexes. This price action continued into Friday, with the Nasdaq reaching a record high. Sadly, it couldn’t hold on to it, but still managed to close higher by 0.56%. The S&P 500 ($SPX) and Dow Jones ($INDU) snapped their six-week winning streak, but the Nasdaq retained its seven-week winning streak.

Technology was the top-performing sector on Friday, followed by Consumer Discretionary and Communication Services (see the StockCharts MarketCarpets screenshot below). It looked like the stock market had regained its mojo for a little while, but the week ended without giving investors much of a sense of direction. Next week could be a different story, since most mega-cap Tech stocks will report quarterly earnings.

FIGURE 1. STOCKCHARTS MARKETCARPET, OCTOBER 25, 2024. Technology regained its top spot in sector performance on Friday. Next week is a big earnings week for technology companies. Will they impress or disappoint?Image source: StockCharts.com. For educational purposes.

The US dollar and precious metals traded higher this week. The 10-year US Treasury Yield Index ($TNX) bounced off its 200-day simple moving average and closed at 4.23% (see daily chart of $TNX below).

FIGURE 2. DAILY CHART OF 10-YEAR US TREASURY YIELD INDEX ($TNX). $TNX bounced off the 200-day moving average and moved higher. The rise in yields suggests investors are uncertain about near-term market direction.Chart source: StockCharts.com. For educational purposes.

Seeing gold, the US dollar, and Treasury yields rally simultaneously is unusual and is an indication of investor uncertainty. So far, the three seem to be holding on to their uptrends. Whenever there’s a slight pullback, they recover quickly and move higher, suggesting that these assets have momentum behind them. The chart below displays the US dollar ($USD), SPDR Gold Shares ETF (GLD), and $TNX.

FIGURE 3. THE US DOLLAR, GOLD, AND YIELDS. Gold has been trending higher in 2024, whereas the US dollar and yields still display a series of lower highs and lower lows.Chart source: StockChartsACP. for educational purposes.

Even though the US dollar and 10-year yields are rising, they haven’t yet established an uptrend. Gold, on the other hand, has been on an upward trend in 2024. 

If you hold a long position in gold, ride the momentum, but know that it could dry up. It’s a good idea to start thinking about managing your position. Gold prices are looking extended, and with Treasury yields and the US dollar as high as they are, I would watch them closely for a reversal, as it could cause gold prices to fall.

Looking Forward

Next week, we will have some key economic data that could influence the Fed’s interest rate decision at their November 7 meeting. According to the CME FedWatch Tool, a 25 basis point cut probability is 95.5%. This could change as economic data comes in next week. If the data supports a strengthening US economy, investors may think the Fed will not cut rates at the next meeting. This could give rise to fear, which in turn spikes volatility.

The Cboe Volatility Index ($VIX) closed higher, but is still relatively low at 20.33. Keep an eye on it, because even a little negative news could send it higher.

Next week is chock full of market-moving events. Earnings from mega-cap Tech and other large-cap companies, plus key economic data (see the End-of-Week Wrap-Up section below), are among them. If trading volatility remains anemic next week, then you know that investors are having the election jitters. You may have to wait another week for trading volume to pick up.

In the meantime, it’s best to exercise patience and focus more on managing your portfolio holdings. If you are going to add positions, keep your sizes small to minimize your risks. The stock market is vulnerable and could make large moves in either direction.

End-of-Week Wrap-Up

• S&P 500 closed down 0.96% for the week, at 5808.12, Dow Jones Industrial Average down 2.68% for the week at 42,114.40; Nasdaq Composite closed up 0.16% for the week at 18,690.01
• $VIX up 12.76% for the week, closing at 20.33
• Best performing sector for the week: Consumer Discretionary
• Worst performing sector for the week: Materials
• Top 5 Large Cap SCTR stocks: Applovin Corp. (APP); Carvana (CVNA); Insmed Inc. (INSM); Ubiquiti, Inc. (UI); MicroStrategy, Inc. (MSTR)

On the Radar Next Week

• September JOLTS Report
• Q3 GDP Growth Rate QoQ Adv
• September PCE Price Index
• October Jobs Report
• October ISM Manufacturing PMI
• Earnings from Alphabet (GOOGL), AMD, Microsoft (MSFT), Meta Platforms (META), Amazon, Inc. (AMZN), Apple Inc. (AAPL), McDonald’s Corp (MCD), Pfizer, Inc. (PFE), Chipotle Mexican Grill (CMG), D.R. Horton, Inc. (DHI), Microstrategy (MSTR), Carvana (CVNA), and many more.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.