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Risks are ensuing the markets… and they could spread like wildfire, catching traders off guard… until it’s too late and all they could smell is fiery smoke.

The White House has shifted its attack plan against China in the ongoing dog fight of a trade war… and Trump may finally have the upper hand.

In a stunning turn of events, the Trump administration noted they were discussing ways to limit flows into China, which would affect major funds.

This is going on all while the two countries have plans to negotiate a potential truce in the trade war… but the U.S. also acted in retaliation, as China removed some limits on foreign investments.

With the quarter coming to a close tomorrow, we could see some wild swings in the market… and that means more opportunities for us to make money.

The big question now: Does the market just rocket through all-time highs, or do stocks pull the ol’ fake out break out and take a dive?

In this week’s edition of The Jump, I’ll be focused on the macro view, charts and catalysts… and the upcoming earnings and IPO calendar. That way, I get an aerial view of the market and can formulate my attack plan.

A Bird’s Eye View of the Market

 

With the fourth quarter starting soon, now’s the time to analyze overall market conditions so you don’t randomly get into trades… and step on a land mind.

One of the easiest ways to get a bird’s eye view of the market and what’s to come is to look at the extreme ends.

In other words, what the safe-haven assets are doing in relation to stocks.

 

Safety Trades

 

Note: Risk off = bad for stocks

When people fear equities, they pile into bonds. Bonds tend to provide more safety due to lower risk. But, they have lower returns.

All year, we’ve seen Treasury yields get destroyed… which caused bond prices to skyrocket, as you can see in the weekly chart below.

Do traders still want bonds?

 

However, we’ve seen a big pullback recently… followed by some choppy price action after some comments from China and Trump.

Over the short-term, things still look a bit muddled.

If you look at the hourly chart in TLT above, you’ll notice it’s trading around a key level — the 200-hourly simple moving average (SMA). This is going to be crucial and will give us an idea as to where TLT can head.

Gold prices signaling risk-off

Gold also acts as a flight to safety. Investors tend to lean on gold when they fear inflation in the dollar… and often times, you’ll see gold prices spike up when there’s political turmoil, economic uncertainty, or any other risks on the table.

With potential contagion risk…

The weekly gold chart still looks very bullish.

GLD says risk-off over the long term, but maybe a touch of risk near-term…

GLD tried breaking below a key level at $140… but no cigar, and it could be ripe for a rebound to multi-year highs very soon.

The flip side of gold is the dollar. When the dollar increases any item priced in dollars should decrease. This includes houses, stocks, gold, oil, etc. So it’s really strange to have the dollar so strong here.

Both the weekly chart in the dollar shows about as strong a bull trend as exists.

Even on the short-term chart, UUP is strong… as we saw the money pattern flash a buy last week, and now it’s at break out levels.

UUP says risk is definitely off no matter the time frame

The Risk On Trades

Naturally, the risk-on trades revolve around stocks. Small caps have a higher risk than large caps… and tech stocks are among the riskiest, especially right now.

So what’s going on with the “overall” market

The SPDR S&P 500 ETF (SPY) lost a lot of upside momentum… and it reminds me a lot of the top we made back in 2015. We’re sort of rounding out here.

New highs aren’t out of the question…

… sure we’ve continued to make higher highs. But, it’s tough to see stocks continue to run higher with no massive pullbacks, like the one we saw last October into the year-end.

Of course, over the long-term SPY looks strong… but the hourly chart paints a different picture.

SPY is sitting right around its 200-hourly SMA, and if it breaks below… we could see a quick plummet.

The QQQ look at lot like the SPY on the weekly chart… but on the hourly chart, we’re seeing some bearish price action.

However, neither is anywhere close to breaking the bull trend. One difference I do see is we didn’t make higher highs in tech stocks.

Following the failed break above all-time highs… QQQ pulled back below a key level on the short-term chart.

QQQ is below its 200-hourly SMA (the green line in the chart above)… and we could see a quick move back down to the $180 level.

Another ETF to keep an eye on is the iShares Russell 2000 ETF (IWM) — the small-cap ETF.

The IWM tends to lead the beginning stages of bull markets. Right now, I see a lot of sideways in the weekly chart. One thing I do know. If we close weekly above or below the blue horizontal lines, price will start moving in that direction with some force.

IWM says it can’t decide where it wants to go on the long-term chart… but on the hourly chart, it’s decidedly bearish.

We saw the money pattern (blue line cross below the red line) and IWM get right to the green line… and it could head lower from these levels.

Right now, the best thing to do is to remain patient and assess the overall situation.

That said, let’s take a look at what’s on the docket for economic catalysts.

Economic Calendar

Monday, September 30

  • 9:45 AM EST                   Chicago PMI for September
  • 10:30 AM EST                 Dallas Fed Manufacturing for September

Tuesday, October 1

  • 3:15 AM EST                   Fed’s Evans speaks in Frankfurt, Germany
  • 7:45 AM EST                   ICSC Weekly Retail Sales
  • 8:55 AM EST                   Johnson/Redbook Weekly Sales
  • 9:30 AM EST                   Fed’s Bowman speaks at Community Banking Conference
  • 9:45 AM EST                   Markit US Manufacturing PMI, Sept-F
  • 10:00 AM EST                 ISM Manufacturing for Sept
  • 10:00 AM EST                 Construction Spending MoM for August
  • 4:30 PM EST                   API Weekly Inventory Data

 

 

Wednesday, October 2

  • 7:00 AM EST                   MBA Mortgage Applications Data
  • 8:00 AM EST                   Fed’s Barkin speaks at conference
  • 8:15 AM EST                   ADP Employment Change for September
  • 9:00 AM EST                   Fed’s Harker speaks at Community Banking Conference
  • 10:30 AM EST                 Weekly DOE Inventory Data
  • 10:50 AM EST                 Fed’ Williams speaks in San Diego

 

 

Thursday, October 3

  • 2:45 AM EST                   Fed’s Evans at Central Banking Conference in Madrid
  • 8:30 AM EST                   Weekly Jobless Claims
  • 8:30 AM EST                   Continuing Claims
  • 9:45 AM EST                   Markit US Services PMI, Sept-F
  • 9:45 AM EST                   Markit US Composite PMI, Sept-F
  • 10:00 AM EST                 Factory Orders for August
  • 10:00 AM EST                 Durable Goods Orders, Aug-F
  • 10:00 AM EST                 ISM Non-Manufacturing Index for September
  • 10:30 AM EST                 Weekly EIA Natural Gas Inventory Data
  • 12:10 PM EST                 Fed’s Mester speaks on inflation

 

Friday, October 4

  • 8:30 AM EST                   Change in Nonfarm Payrolls for Sept
  • 8:30 AM EST                   Change in Private Payrolls for Sept
  • 8:30 AM EST                   Change in Manufacturing Payrolls for Sept
  • 8:30 AM EST                   Unemployment Rate for Sept
  • 8:30 AM EST                   Average Hourly Earnings for Sept
  • 8:30 AM EST                   Trade Balance for August
  • 8:30 AM EST                   Fed’s Rosengren speaks at Boston Fed Conference
  • 10:25 AM EST                 Fed’s Bostic speaks at Tulane University
  • 1:00 PM EST                   Baker Hughes Weekly Rig Count

IPOs have been acting a bit wacky, but that doesn’t mean there aren’t still opportunities to make money… here’s a look at some companies set to go public this week.

Expected IPOs:

  • ADC Therapeutics (ADCT) 8.164M share IPO expected to price between $23-$26 per share
  • Aprea Therapeutics (APRE) 5M share IPO expected to price between $14-$16 per share
  • Frequency Therapeutics (FREQ) 6.7M share IPO expected to price between $14-$16 per share
  • Viela Bio, Inc. (VIE) 7.5M share IPO expected to price between $19-$21 per share

Now, we’ve got a relatively light earnings calendar this week… but some names I’m wathcing include:

  • Stitch Fix (SFIX) expected on Oct. 1, implying 21.37% move, the historical average move is 19.4%.
  • Ford (F) expected on Oct. 2, implying 3.41% move, the historical average move is 4.91%.
  • Bed Bath and Beyond (BBBY) expected on Oct. 2, implying 16.18% move, the historical average move is 12.68%.
  • Pepsi Co. (PEP) expected on Oct. 3, implying 2.76% move, the historical average move is 2.03%.
  • Constellation Brands (STZ) expected on Oct. 3, implying 5.58% move, the historical average move is 5.2%.
  • Costco (COST) expected on Oct. 3, implying 4.61% move, the historical average move is 3.84%.

The fourth quarter starts in two days… and if you haven’t done so already… make sure you have the right strategies in place so you can attack the market from any direction.

For the most part, I’m sticking to my Bullseye Trade of the week and Total Alpha strategies… and by leveraging the power of them, I think this quarter will be one of my most profitable ones ever.

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