{"id":19036,"date":"2021-10-12T07:30:30","date_gmt":"2021-10-12T11:30:30","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19036"},"modified":"2021-10-12T07:30:30","modified_gmt":"2021-10-12T11:30:30","slug":"the-new-narrative-begins-this-wednesday","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/the-new-narrative-begins-this-wednesday\/","title":{"rendered":"The New Narrative Begins This Wednesday"},"content":{"rendered":"

Despite some weakness lately, the bears<\/a> won’t be getting their “I told you so” moment.<\/p>\n

At least, not yet…<\/p>\n

Just when it seemed like the rug would finally<\/em> be pulled from under this market…<\/p>\n

The long-term trend found strength and carried on.<\/p>\n

New research from Goldman Sachs sums up why that is…<\/p>\n

Over the weekend, two of their research departments came out with dueling data points:<\/p>\n

Their economics team cut<\/em> forecasts for U.S. growth for 2021 and 2022, while the firm’s equity strategists issued a statement that the stock market will continue to rise<\/em> anyway.<\/p>\n

They think investors will gain enough confidence to believe that inflation is just temporary, and therefore send the S&P 500 to $4,700… or about 7% higher from current levels.<\/p>\n

In other words, they’re betting that investors will simply feel <\/em>better about things.<\/p>\n

That seems like a contradiction… aside from being too simple to actually work.<\/p>\n

After all, how could a market with slowing growth rise?<\/p>\n

But, as it turns out, they may actually be right.<\/p>\n

That’s because one of the most negative narratives weighing down the markets lately may now be over…<\/p>\n

Narratives Change as Fast as the Markets<\/strong><\/h2>\n

Those who think this entire market is one big, overpriced bubble might not like this explanation, but then again, they keep missing great opportunities…<\/p>\n

That\u2019s because, most of the time, narrative dominates markets… and those narratives can change as fast as people’s moods do.<\/p>\n

So as a trader, it’s important to have your finger on the pulse of what’s currently driving markets.<\/p>\n

At the highs on September 3, we pointed out a big break in enthusiasm in financials<\/a> – specifically AIG. AIG was the top performer at the time, and this was a sign that the euphoric mood in the markets was about to change.<\/p>\n

That was the peak of the market – where the market fell more than 5% in just four weeks as the narrative quickly shifted from the bull<\/a> market in financials to the cratering in Chinese stocks.<\/p>\n

Yet another market mood swing was underway…<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Whether it was the countless crackdowns on internet companies, the Evergrande debt crisis, or China just banning crypto outright… the market has been afraid of what’s going on in China.<\/p>\n

But take a look at the chart below…<\/p>\n

\"\"<\/p>\n

(Click here to expand image)<\/a><\/p>\n

It shows the price of Baidu (BIDU), with its Twitter mentions on the bottom.<\/p>\n

A few months back, we laid out a framework for identifying where we are in the hype lifecycle<\/a> and how to profit from it… and social media is a big part of that.<\/p>\n

As prices were at their lows, social media mentions on these stocks were at their highs…<\/p>\n

But, all of that seems to be behind us now.<\/p>\n

BIDU is now trading above peak fear levels and is oversold enough that it seems traders are piling in, angling to retest the 100- and 200-day moving averages around 20% above current levels.<\/p>\n

Here’s another one of Alibaba (BABA), one of the big Chinese tech companies at the epicenter of the fallout…<\/p>\n

\"\"<\/p>\n

(Click here to expand image)<\/a><\/p>\n

Here, we see the same pattern…<\/p>\n

The fact that these stocks are trading above late August levels tells me that peak fear related to China is over for the moment…<\/p>\n

Which also means that the last leg down was driven more by hype than by anything else.<\/p>\n

It also means the market is ready for a new narrative to trade on.<\/p>\n

Earnings season kicks off on Wednesday with the financial sector reporting first…<\/p>\n

As we mentioned on October 8<\/a>, the chart on the Financial Select Sector SPDR Fund (XLF) is one of the most important charts in the market.<\/p>\n

That’s because amid the recent volatility<\/a> in markets overall, XLF has held up. A true global fallout from events in China would have financials underperforming all other sectors, but in fact, it has been the opposite.<\/p>\n

A positive reaction from earnings may be the new narrative that proves Goldman Sachs analysts right.<\/p>\n

Regards,<\/p>\n

Eric Shamilov
\nContributing Editor, Market Minute<\/em><\/p>\n

Reader Mailbag<\/strong><\/h2>\n

Let us know your thoughts on the China fallout…<\/p>\n

Do you think Chinese stocks have found a bottom? Will the S&P 500 rise to new highs after earnings?<\/p>\n

Let us know what you think – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

It seems like a contradiction…<\/p>\n","protected":false},"author":25,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[13],"newsletter-type":[],"ticker":[],"class_list":["post-19036","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-eric-shamilov"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19036","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/25"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19036"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19036\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19036"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19036"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19036"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19036"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19036"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19036"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19036"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}