To The Moon

The $.SPX(.SPX)$ and $.IXIC(.IXIC)$ returned 1.13% and 1.19%, respectively, last week. Major market movers include $NVIDIA Corp(NVDA)$ (+7.91%), $Eli Lilly(LLY)$ (+5.06%), $JPMorgan Chase(JPM)$ (+5.24%), $Uber(UBER)$ (+16.24%), $Wells Fargo(WFC)$ (+7.08%), $Tesla Motors(TSLA)$ (-12.91%), $Alphabet(GOOG)$ (-2.29%), $Meta Platforms, Inc.(META)$ (-1.01%), $Constellation Energy Corp(CEG)$ (-6.76%), and $Vistra Energy Corp.(VST)$ (-9.48%). Key economic data this week includes Retail Sales and Unemployment Claims on Thursday. Important earnings announcements this week: Tuesday: $Citigroup(C)$ $Bank of America(BAC)$ $Charles Schwab(SCHW)$ , $Goldman Sachs(GS)$ , $UnitedHealth(UNH)$ and $Johnson & Johnson(JNJ)$ Wednesday: $ASML Holding NV(ASML)$ , $Morgan Stanley(MS)$ , $Abbott Laboratories(ABT)$ Thursday: $Taiwan Semiconductor Manufacturing(TSM)$ , $Netflix(NFLX)$ , $Intuitive Surgical(ISRG)$ Friday: $American Express(AXP)$ Things You Should Know Before Starting Your Week: 1) The $Cboe Volatility Index(VIX)$ is rising alongside the S&P 500, indicating a potential correction ahead. The VIX is currently trading at 20.46, compared to a year-to-date average of 15.17. Oftentimes, the VIX has a negative correlation with the S&P 500. Therefore, the rising VIX may signal trouble ahead for the S&P 500, which is trading at its all-time high. The VIX futures curve is inverted again and has remained inverted for most of September and October thus far, indicating that the S&P 500 is pricing in higher near-term fear. Source: Bloomberg, Tiger Brokers, 14 Oct 2024 2) The Prospect of a Divided Government Is Driving the Equity Market Higher Trump currently has better odds of winning the US presidential election. According to bookmaker PredictIt, Trump shares are priced at 54 cents, while Harris shares are at 49 cents. Despite the tight race, investors are anticipating a split Congress—where the House of Representatives and the Senate are controlled by different political parties—or a divided government, in which one party holds the presidency while the other controls at least one chamber of Congress. Current odds suggest Republicans are likely to gain control of the Senate, while Democrats have a greater chance of retaking the House. Consequently, regardless of the US presidential election outcome, extreme policies that could disrupt the business cycle are less likely to be enacted due to a potential split congress. As a result, investors expect the stock market to rise following the election. Source: Bloomberg, 14 Oct 2024 3) Technology Sector Continues to Drive $.SPX(.SPX)$ Higher: The S&P 500 has risen 3.1% since September, with the technology sector accounting for 46% of this gain. The technology sector has risen for five consecutive weeks. Investors have flocked back to AI-related stocks, viewing generative AI as a long-term transformative trend. $ASML Holding NV(ASML)$ and $Taiwan Semiconductor Manufacturing(TSM)$ are scheduled to release earnings on Wednesday and Thursday, respectively, and their results can serve as a bellwether for the semiconductor industry. The technology sector may see further gains if both companies exceed their Q3 2024 expectations and provide better-than-expected earnings guidance. Conclusion: Israeli retaliation against Iran, election uncertainties, negative earnings surprises, and the historically weak performance of October could destabilize the stock market. Therefore, I believe bears are not ready to abandon their pessimistic outlook just yet. In summary, I remain short term bearish primarily due to bad October seasonality, but I anticipate a rally beginning in November. I continue to favor AI beneficiaries, such as the Magnificent Seven, along with semiconductor stocks like Broadcom $Broadcom(AVGO)$ , ASML $ASML Holding NV(ASML)$ , ARM $ARM Holdings Ltd(ARM)$ , TSMC $Taiwan Semiconductor Manufacturing(TSM)$ , Oracle $Oracle(ORCL)$ , and AMD.