Welcome to the latest edition of “Weekend Reading For Traders”. We kick things off this week with a discussion of the action around the latest reading on inflation and how (or if) it may influence the Fed’s thinking. 

From there, we highlight a couple of articles around seasonality… one which points out yet again that midterm years have a tendency to start weak (yup) but finish strong (we’ll see), while the other looks at the same seasonal tendencies under a different lens.

And in a world where division and disagreement have become a defining feature of our daily lives, we wrap up with a pair of articles about two things that (hopefully) the majority of Americans can agree on!

And with that, we hope you enjoy this latest installment of Weekend Reading For Traders.


U.S. Wages Rose Rapidly In Third Quarter, Keeping Pressure on Inflation

(Gabriel T. Rubin | The Wall Street Journal)

Last week we highlighted a couple of articles that discussed why the wild action on the heels of the latest CPI data might have been a bullish signal for stocks. Since then, the indices have been trending higher, with the Dow… and particularly the Russell 2000(!)… leading the way. The broader market was even able to shrug off a number of head-turning earnings misses from a handful of mega-cap tech names. Given the fact that several counter-trend bounces over the past several months have been driven by (unfulfilled) hopes for a Fed pivot, it’s hard not to notice the sharp rally into the close the previous Friday after Nick Timiraos (widely considered to be the journalist the Fed now uses to manage market expectations) published an article (which was originally titled “Fed Eyes Slowing The Pace Of Rate Increases” in the print edition, but was later changed online) that discussed how several members were “signaling their desire… to slow down the pace of increases”. Which brings us to this past Friday’s action and the release of the latest Personal Consumption Expenditures (PCE) Price Index, which (as Timiraos tweeted ahead of the data, “is the Fed’s preferred inflation gauge”) showed headline PCE of 5.1%, which while higher than last August, further developed the downside trend that began few months ago. And while the data weren’t soft by any means, they were at least not terrible enough to alter the narrative that the Fed could slow the pace and/or intensity of rate hikes as soon as December. Regardless of any interpretation of the market’s reaction, index futures reversed on the news and the market enjoyed a trend day higher, with the two senior indices leading to the upside. Again, as we’ve been noting lately, the primary (and most important) trend remains down, but it’s always important to pay attention to evidence that a shift may be in the works… especially since there were…

9 Reasons Why We May Have Seen The Market Bottom This Week

(Brian Lund | The Lund Loop)

Although there are plenty of market pundits who try to make a name for themselves by calling tops on every fresh high in a bull market and declaring that the bottom is in on every fresh low in bear markets (thus ensuring that they’ll eventually be “right” and can then claim that they “successfully” called a major market turn), Lund reminds us in this article that investors can’t ever truly know if the primary trend has changed until after the fact. However, with the understanding that the best opportunities are (almost always) created in bear markets, it’s important to keep an eye out for evidence of bottoms in order to be ready to move quickly and aggressively. Accordingly, Lund shares a number of observations about why we may have indeed seen the market put in a bottom, including the fact that the number of new 52-week lows peaked in June, some pockets of momentum are starting to crop up (even as a handful of mega-cap tech names took it to the chin this past week), the VIX is starting to act “normal” again, and all four of the major indices have reclaimed key technical levels. Lund also shares a few more reasons that he delivers with the classic humor that he’s known for, so we’ll leave it up to you to read what those are.

The Best Six Months Of The Year For Stocks

(Ryan Detrick | Carson Group)

Last week, Detrick pointed out that October is the month when the vast majority of bear markets since 1946 have gone to die since 1947, and so far, this October is living up to that reputation. And while the start to this year has been the third worst on record for the S&P 500, analysts like Detrick have been pointing out for months that midterm years not only have a historical tendency to start off poorly, but they also tend to finish the year strong and see solid follow-through into the third year of the presidential election cycle (as evidenced by the fact that ” looking at the November through April period shows that stocks have been higher every single time during a midterm year going back to 1950″. Of course, strong track records aren’t ever a guarantee of positive future results and don’t eliminate the need to remain vigilant, but investors can at least be aware of the evidence supporting a bullish case.

Bear Market Seasonality

(Callum Thomas | Topdown Charts)

Speaking of seasonal tendencies, it’s always important to consider historical data sets in the context of their historical market regimes. Is the primary trend higher or lower? Are the indices above or below their respective 200-day moving averages? In this article, Thomas examines one of the more popular market aphorisms “Sell in May and go away” to see if it held true in all market regimes. Interestingly, he found that “‘Sell in May’ only works in bear markets” and simply isn’t a thing in bull markets… which certainly rings true for active investors who have been paying attention to that six-month period over the past 12 years. What was far more interesting, however, was that Thomas’ research also found that the much anticipated end-of-year/midterm rally isn’t a feature during a bear market… with the important caveat that Thomas defines a bear market (for this analysis) as a year when the market closes the down for the year, which certainly seems likely.

What Your Dog Wants

(Melinda Wenner Moyer | The New York Times)

The pandemic was the catalyst for a lot of change in many of our lives, including the 23 million or so households who got their first pet. And for some, transitioning to pet ownership wasn’t always the easiest endeavor (especially when combined with the need for many families to figure out how to work and learn and live together… every. single. day!). Accordingly, in this article, Moyer throws first-time (and many long-time) dog lovers a bone by sharing some pointers on interpreting (and responding to) their dog’s various behaviors, including possible signs of stress (because tail-wagging doesn’t always indicate that your pup is happy), cues they give in social situations (because not all dogs are dog people… or people people!), and why it’s important not to anthropomorphize your dog and project our assumptions about ourselves on how they behave. Ultimately, the key point is that dogs are very good about communicating their feelings and moods, and it’s up to us to learn how to better understand what they’re telling us.

How To Watch Football Like An Expert From The Comfort Of Your Couch

(Ted Nguyen | The Athletic)

For those who have grown up watching football, the rules and flow of play seem like second nature, but for anyone who’s tried to explain the game to a younger generation that isn’t as intrigued by watching professional sports on television (or to a citizen of literally any other country in the world who understands a completely different version of football), the sport can be astoundingly difficult to gronk. And even for those who do have a deeper understanding, there are many more aspects to the game than many casual fans aren’t even aware of. In this article, Nguyen discusses how we can move beyond a basic (or even intermediate) level of appreciation to a higher level of expertise, with some tips for further study for those who as so motivated. Some highlights include details on RPOs and screens, the thinking behind motion and shifts, the differences between various kinds of defensive coverage, and tips on how viewers can “find the grass”, among others. Ultimately, Nguyen’s piece is a great jumping-off point for those who would love to be able to appreciate more of the game’s nuances but have been unsure of where to start.