Weekender for 12/25
1. Market Summary
Here Comes Santa Claus and There Goes Santa Claus?
- Here comes Santa Claus and there goes Santa Claus?
- Third revision of Q3 gross domestic product (GDP) upsets the Wednesday rebound.
- Stock indices sell hard through midday but then mount impressive recoveries.
- Bids returned after the market was rattled by GDP. Will the Personal Consumption Expenditures Price Index (PCE) help the Santa rally that tried to start Wednesday resume?
There goes Santa Claus? A stronger third read on Q3 GDP, including a higher PCE, hammered futures. The premarket trade was already a bit soft but nothing major. When the upgrade to GDP came (3.2% vs 2.9% previously reported) futures immediately sold off two times the pre-data level, adding more downside as the opening bell approached.
The hope of a backpedaling Fed had to backpedal itself in the face of yet stronger data. Of course, after the discovery that the Bureau of Labor Statistics (BLS) jobs reports vastly overstated jobs in 2022, can any upside data be trusted in the midst of all the flagging economics, e.g. existing home sales down 28%, lumber prices down 72% from February ($1,336/thousand board feet versus $380 this past week)? Dubious.
NOTE: The figures and information above are from the 12/22 report.
Watch the Investment House Video For This Week Here!
NOTE: The video is from the 12/21 report.
2. Targets Hit
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McEwen Mining Inc. (NYSE: MUX): MUX produces various metals, including precious metals. Those stocks have started to perform as they do when the United States is in a bear market. Indeed, from the start of June to late November, MUX formed a very nice cup-with-handle base. It broke over the 200-day simple moving average (SMA) but could not hold it. It immediately rebounded, however, and when MUX cleared the 200 day SMA once again on Nov. 30, that was our signal to enter.
We issued the alert to buy with the stock asking for $5.43. The next session, MUX shot higher to $5.95, just shy of our target of $5.98. It was a no brainer that it would quickly move through that level. It didn’t. MUX then fell into a trading range along the 10-day and 20-day exponential moving average (EMA) for the next 2.5 weeks. It held near support, so we kept it on, despite the frustration of being so close to the target before the fade.
Then, this week, it caught new lift, rallying Wednesday, Thursday and into Friday. Friday it opened upside and touched the target for about one second — then immediately faded. It was not rolling over, however. We opted to go ahead and bank the gain, issuing the alert to sell with the stock bidding $5.88, a solid 8.29% gain. If MUX breaks out over $6 — obviously a bit of a resistance point and hence our target at $5.98 — we will look at a new play as it frees itself for a move higher.
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3. Covered Call Options Play
Arhaus Inc. (NASDAQ: ARHS) — Arhaus Inc. is currently trading at $9.75. The Jan. 20 $10 Calls (ARHS20230120C00010000) are trading at $0.45. That provides a return of about 8% if ARHS is above $10 by the expiration.
