Weekly Stock Market Update & SPY Technical Analysis
It would be crazy if we didn’t address the elephant in the room…so, let’s get that out of the way. The CEO of the most prolific company in the AI buildout has reportedly been cheating on his wife with a Chinese SPY, and the company filed an official investigation examining his relationship with this said person.
We’re not going to make this into a drama, let’s just skip to the implications of this on the stock and Nvidia as a company. For the stock, we can definitely expect volatility, but not a total sell-off. A situation where a large scale selling may happen is if the investigations find Nvidia CEO Jensen Huang actually gave away secrets to Alice Huang (the suspected Chinese SPY). If any secrets were given, the reaction would be based on how jeopardizing those secrets are to the company. Another possible outcome is Nvidia’s board replaces Jensen Huang as CEO. This part is more unlikely, as long as Jensen didn’t willingly give away secrets, or had knowledge that this was indeed a Chinese SPY prior.
What’s worth keeping an eye on is Marco Rubio reportedly oversaw a drafting of highly classified memo this spring that suggested a woman who had established a close relationship with Jensen Huang worked for China’s Ministry of State Security; and informed U.S. officials, yet it was not acted on. It’s one of those situations where we have to wait and see what happens, but the likely chance of Jensen being out as Nvidia CEO are slim, as long as he truly didn’t know and didn’t give away secrets. It’s hard to imagine he has a motive to.
Back to our regularly scheduled program: this week on the stock market + November outlook
Inflation data will take the spotlight as the most important economic data this week. October’s CPI will give insights on how surging fuel prices impacted consumer inflation, and whether the Federal Reserve may need to keep interest rates higher for longer. This comes at a particularly important time for the stock market. Last week, the S&P 500 declined 2.7%, while the Nasdaq lost 3.4%, as technology and semiconductor stocks continued their correction.
Meanwhile, October's employment report showed the economy adding 165,000 jobs, with unemployment holding near 4.1%. A resilient labor market gives the Federal Reserve less reason to rush into cutting interest rates, making this week's inflation reports especially important.
We’ll cover these reports and their market implications as they’re released this week.
November Stock Market Outlook
We remain cautiously bullish for November and into next year, but our favorite picks have changed significantly. The AI buildout was great to many, and we saw a rising tide lift all the “boats” for a while, but the cost of money (interest rates), and the cost of the AI buildout are becoming very expensive. We still like many AI names, but we’re focused on those with strong revenue growth, high margins, sizable balance sheets, low debt, and positive FCF. That’s a lot to ask, but that’s how selective we’re becoming about AI stocks right now…that’ll change when interest rates come down and growth stocks rotate back to favorites.
REMINDER, the market has 11 sectors and dozens of industries to pick from, which means we can shift focus away from AI stocks and research other companies. We highlight five of these companies every week, here’s our latest watchlist picks:
SPY Technical Analysis
The week over week trend is still bearish, and last Friday's price action closed near the lows of the week. The way this week finishes likely depends on inflation data...buyers need to close SPY above 775.64 to regain the week over week trend on Friday.