I’m glad it’s November… October was brutal for the market.
History shows we’re due for a BIG move in the next few weeks.
I’m watching specific setups.
A glance at major indexes could confuse traders about October’s momentum…
The S&P 500 is still up about 11% on the year.
But underneath the hood, Wall Street started shooting generals. The market’s biggest leaders were taken out back, one by one.
Semiconductors fell almost 28% in 30 days. And last Friday, October 30, the Nasdaq slid 2.8% in a single session.
Starting this week, it could all reverse.
4 massive catalysts are about to hit the market…
- Apple and Palantir earnings (last night)
- The midterm elections (today)
- The JOLTS report (today)
- The October jobs report (Friday)
Each catalyst could move the market on its own. Together, they could decide how stocks finish the year.
And history gives us a hint about the most likely outcome.
I’m already positioning for it.
Catalyst #1: Apple and Palantir Earnings
Apple reported after the close yesterday.
Wall Street expected $1.99 in EPS on about $113.4 billion in revenue. But the headline numbers probably won’t matter much.
Traders are watching margins and overall costs.
Apple guided for a gross margin of 47%–48%, down from 50.1% last quarter, as memory costs climbed.
The current stock price demands perfection.
Apple is up 27% this year, and it trades near 40 times its earnings. That leaves almost no room for error. Last quarter, Apple beat on revenue and EPS, and the stock still fell 7.4% the next session.
Options traders are pricing in a move of about 4.25% either way.
Palantir reported last night too.
The company’s guidance estimated Q3 revenue at $2.164 billion. Going into earnings, Wall Street estimates sat near $2.18 billion, or 85% growth.
That’s a monster number. And so is the valuation. PLTR trades at more than 100 times its sales.
Options traders are bracing for a move of roughly 13%.
In a market that’s been punishing the best earnings results, the market reaction matters more than the report.
Catalyst #2: The Midterm Elections
Voters head to the polls today. Every House seat and about a third of the Senate seats are on the ballot.
Election uncertainty makes investors nervous. That’s normal.
But once the votes are counted…
According to a CNBC analysis, in the year after all 11 midterms from 1982 through 2022, the S&P 500 pushed higher. The average one-year gain since 1980: 13.7%.
Red wave. Blue wave. Split Congress. It doesn’t matter. Stocks go up.
In fact, elections that left a dual party in charge did even better, with an average one-year gain of 15%.
Now, that doesn’t mean the market will rip tomorrow.
CNBC found the short-term reaction is usually muted, about 0.2% after one day.
The market hates uncertainty more than any single outcome. Once the results are in, that uncertainty starts to clear.
That’s why I think this is a buy-the-news event, no matter who wins.
When the catalyst passes, and the world doesn’t end, sellers run out of reasons to sell.
Catalyst #3: The JOLTS Report
While votes are being cast, the JOLTS report drops at 10:00 a.m. ET today.
JOLTS stands for Job Openings and Labor Turnover Survey. It covers the month of September and shows how many jobs employers are trying to fill, how many people got hired, and how many quit.
Think of it as a detailed look under the hood of the labor market.
Right now, every labor number matters for a very specific reason…
The Fed.
The Fed held rates at 3.75%–4% last week. But futures are still pricing roughly 75%–85% odds of a December rate hike.
A hot JOLTS print, with openings and hiring picking up, could push those odds even higher.
A strong labor market amid sticky inflation means the Fed has room to hike interest rates.
A cooler print could do the opposite. It would give Warsh more room to wait, and that could take pressure off stocks.
Either way, it sets the tone for Friday’s even bigger number…
Catalyst #4: The October Jobs Report
The October jobs report lands Friday at 8:30 a.m. ET.
Consensus calls for about 55,000 jobs and a 4.2% unemployment rate.
For context, September added just 29,000 jobs.
That’s a far cry from earlier this year, when employers added 172,000 jobs in May and 162,000 in August.
This jobs report is a double-edged sword…
A strong number could lift yields and revive December rate hike fears.
A weak number could spark fears that the economy is cracking, which could postpone a rate hike, but still shows bearish economic weakness.
The sweet spot? A soft but steady print. Enough to cool rate-hike fears without pointing toward a recession.
My Trade Plan
Four catalysts. One week…
- Apple and Palantir could reignite the AI trade, or deepen the selloff.
- The midterms could end months of uncertainty.
- JOLTS for September impacts the interest rate outlook.
- The jobs report for October all but confirms the interest rate outlook.
I don’t know how each catalyst will play out. And I don’t need to.
History favors the bulls after midterms. And after a month like October, a lot of stocks are deeply oversold.
That’s why I’m trading with a bullish call bias this week.
But remember, oversold stocks can become overbought very quickly. There’s volatility ahead.
When a stock falls 50% in a straight line, it doesn’t bounce 3%. It bounces 15% or 20%.
Trade small. Wait for the market to show its hand. And pay attention to the most volatile setups.
Stay Street Smart,
Jeff Zananiri
