Signals · theoretical, educational setups
Energy Closed at a Record While Gold Hit a Three-Month Low, and Verizon Reports Into a Towers Scare
Three theoretical setups for the week of the Fed and the megacap reports: the Energy Select Sector SPDR, which closed at a 12-month high of $69.33 as Brent settled at $116.72; SPDR Gold Shares, whose $366.61 close was the lowest since July 16 with spot gold below $4,000; and Verizon, which reports on Monday morning after a report that SpaceX wants 80,000 US cell sites took 8% off AT&T and T-Mobile and only 1.2% off Verizon.
XLE · Energy Select Sector SPDR Fund — Bullish, Short-term (days). XLE rose 2.6% to $69.33 on October 23, its highest close of the past year, as the S&P 500 energy sector closed at a record on a day when about three in four stocks in the index fell. The move had a fundamental floor under it: December Brent settled at $116.72, its highest since April 29, after further Houthi attacks on Saudi Arabia and Aramco's evacuation of its Dhahran headquarters, and SLB rose 7.08% on a beat, which says the market is paying for the services side of the trade, not only the barrel. Chevron and Exxon report on October 30, and both have reasons to show strong cash flow at these prices. The setup is a continuation into those reports while the Gulf headlines persist; the risks are a ceasefire or mediation report, which has knocked several dollars off crude in a single session this month, and a Fed that leans hawkish on Wednesday and hits cyclical sectors. A daily close below $67.57, the October 22 close that preceded Friday's breakout, would invalidate the setup.
GLD · SPDR Gold Shares — Bearish, Short-term (days). GLD fell to $366.61 on October 23, its lowest close since July 16 and about 26% below its 12-month closing high, as December gold futures settled at $4,007.90 and spot gold traded below $4,000 again, for a weekly loss of about 4%. The driver is unusual for a geopolitical week and is the point of the setup: oil above $115 is being read as inflation first, the October flash PMI showed selling prices rising at the fastest pace since August 2022, consumers' year-ahead inflation expectations rose to 4.7%, and futures price a December rate increase as likely, all of which raise the cost of holding a metal that pays nothing. The week's bounces stalled at $379.55 on October 21 and $369.25 on October 23, each lower than the last. The setup is a test of the July lows around $362 to $365 into Wednesday's Fed decision and Thursday's PCE report; a dovish surprise from either is the risk. A daily close above $373.87, the October 22 intraday high, would invalidate the setup.
VZ · Verizon Communications Inc. — Neutral, Short-term (days). Verizon closed at $44.66 on October 23, down 1.19%, while AT&T fell 7.96% and T-Mobile 7.71% on a Bloomberg report that SpaceX is negotiating access to at least 80,000 US cell sites for a fourth carrier. Holding up that well before an earnings report is not the same as being safe. Verizon reports before the open on Monday, October 26, with consensus near $1.27 of adjusted earnings on revenue of about $34.85 billion and full-year guidance for postpaid phone additions in the upper half of 750,000 to 1 million, and AT&T showed this week that a beat can still cost 6% if phone additions miss and the call is about Starlink. Earlier in October the stock gapped from $46.35 to $41.65 in a session, so the range of outcomes is wide. The levels define the reaction rather than a direction: a daily close above $45.29, the October 22 high, would say the market has decided Verizon is the least exposed carrier; a close below $43.00, the October 21 low, would say Friday's resilience was only a delay. Until Monday's numbers, there is no edge in guessing which.