🙇 China's falling

and Boeing rings the warning bells

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Good morning investors! Friday proved to be a great day for the stock market, and this week, all eyes will be on the Fed’s rate announcement.

Today we cover:

  • A look at the changing Chinese economy

  • Boeing to get worse?

  • Identifying overbought stocks

📊 Economy and News 

The changing (and falling) Chinese economy

China's key economic indicators for August showed slower-than-anticipated growth, as reported by the National Bureau of Statistics. Retail sales increased by 2.1% compared to the same month last year, falling short of economists' expectations for 2.5% growth. This was also a decline from the 2.7% rise recorded in July. Online sales of physical goods grew by just under 1% year-on-year.

Industrial production grew by 4.5% in August, below the 4.8% forecast, and down from July's 5.1% growth. Although the increase in industrial output surpassed that of retail sales, it highlighted a structural imbalance in China’s economy, with stronger supply compared to weaker demand. Darius Tang, associate director at Fitch Bohua, remarked that the government will likely implement gradual stimulus measures in the fourth quarter to bolster consumption and the real estate sector.

Fixed asset investment for the period from January to August grew by 3.4%, slightly below the predicted 3.5% growth. Meanwhile, the urban unemployment rate rose to 5.3% in August, up from 5.2% in July.

Losing confidence: A recent American Chamber of Commerce survey has found record low levels of profitability and business confidence amongst its members in China.

The report follows similar findings from a recent US-China Business Council survey, with U.S.-China tensions and a slowing economy listed as top causes.

Things not working: China’s plan to boost consumption by encouraging trade-ins has yet to show significant results since it was announced in late July, businesses said.

“We are not aware of companies that have seen this translate, since the promulgation of the measures, into concrete incentives on the ground in China,” Jens Eskelund, president of the EU Chamber of Commerce in China, told reporters earlier this week.

Several major cities and provinces have only in the last few weeks announced details on how the trade-in program would work for residents.

More changes: China’s top legislative body passed an official plan Friday to begin incrementally raising the nation’s statutory retirement age from Jan. 1 of next year and concluding in 2040, according to Chinese state media.

The final goal of the 15-year plan is to raise the retirement age by three years for men to 63 years old, five years for women who work in factories from 50 to 55 and three years for women who work in white-collar jobs from 55 to 58.

Global hits:

Interesting: US dollar drops to near 9-month low versus yen amid talk of larger Fed rate cut; however, Goldman Sachs still sees 25 basis point Fed cut.

📈 Stocks

S&P 500 5,626.02 (+054%)
DJIA 41,393.78 (+0.72%)
NASDAQ 17,683.98 (+0.65%)
BRENT CRUDE 7163 (-0.65%)
* Prices as of Sep 15th, 12:20 AM UTC

Boeing strike to cause more damage?

Boeing's Chief Financial Officer, Brian West, expressed concerns about the negative impact of the labor strike that began early Friday.

The strike followed the overwhelming rejection of a new labor contract by factory workers, who walked off the job. West acknowledged that the strike could disrupt aircraft deliveries and pose a serious threat to the company’s recovery efforts, especially as it affects the production of Boeing's bestselling aircraft, including the 737 Max, produced in Renton, Washington.

He also highlighted the importance of resuming negotiations and reaching a mutually beneficial agreement for workers and the community.

Financial Consequences and Investor Reactions

The duration of the strike will determine its financial impact, but West noted that it could significantly hinder Boeing’s production targets.

Despite aiming to produce 38 units of the 737 Max monthly by year-end, West declined to confirm whether this goal would be met under current conditions.

Investors responded swiftly to the news, with Boeing’s stock dropping nearly -4% on Friday.

Credit agencies like Moody’s and Fitch Ratings indicated that a prolonged strike could lead to a potential downgrade of Boeing's credit ratings, further complicating the company’s already debt-laden financial situation.

Labor Contract Dispute and Worker Demands

The strike was triggered after Boeing workers in Seattle and Oregon voted overwhelmingly—over 94%—to reject a tentative labor agreement.

While the proposed contract included a 25% wage increase over four years and enhancements to healthcare and retirement benefits, workers sought a 40% wage increase to address rising living costs.

With 96% of workers voting in favor of striking, Boeing now faces potential production delays, adding to the challenges the company has experienced as it strives to rebuild its reputation after previous safety concerns.

Good news: DirecTV, Disney reach deal to end blackout in time for college football. Elsewhere, Pfizer said its experimental drug for deadly condition that causes appetite and weight loss in cancer patients shows positive trial results.

Surprising: Home Depot to pay $2 million settlement for overcharging customers.

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💵 Personal Finance

Identifying Overbought Stocks

Identifying overbought stocks can help investors avoid buying at inflated prices or prepare for potential pullbacks. One of the most effective tools to identify such stocks is technical analysis, which focuses on the stock’s price movements and trading volumes. Here are the primary methods used to determine if a stock is overbought:

1. Relative Strength Index (RSI)

The Relative Strength Index (RSI) is one of the most popular indicators for identifying overbought conditions. It is a momentum oscillator that measures the speed and change of price movements over a specific period, typically 14 days. The RSI scale ranges from 0 to 100, with a score above 70 generally indicating that a stock is overbought.

  • RSI above 70: Suggests the stock has been in a strong upward trend and may be due for a correction.

  • RSI below 30: Suggests the stock is oversold and may be positioned for a rebound.

2. Moving Average Convergence Divergence (MACD)

The MACD is another momentum indicator that can help identify overbought conditions. It measures the relationship between two moving averages of a stock’s price (typically the 12-day and 26-day moving averages).

  • MACD Crossover: When the short-term moving average crosses above the long-term average, it signals bullish momentum. However, when the MACD line diverges too far from the signal line, it may indicate the stock is overbought and due for a pullback.

3. Bollinger Bands

Bollinger Bands are a technical analysis tool that uses moving averages and standard deviations to measure volatility. They consist of three lines: a simple moving average (middle band) and two bands that represent volatility (upper and lower).

  • Upper Band Breach: When a stock price consistently trades near or above the upper Bollinger Band, it suggests that the stock may be overbought and could soon correct.

4. Stochastic Oscillator

The Stochastic Oscillator is another momentum indicator that compares a stock's closing price to its price range over a specific period. The oscillator generates a value between 0 and 100, similar to RSI.

  • Stochastic Value above 80: Indicates that the stock may be overbought.

  • Stochastic Value below 20: Suggests the stock is oversold.

5. Price-to-Earnings (P/E) Ratio

While not a technical indicator, the P/E ratio is a fundamental analysis metric that can provide insights into whether a stock is overbought. A high P/E ratio compared to historical averages or industry peers may suggest that a stock is trading at an inflated price and could face a correction.

Additional Considerations

  • Volume Spike: An unusually high trading volume accompanying a stock’s sharp rise may indicate that the stock is overbought, as it shows heightened buying interest that could eventually reverse.

  • Overbought in Context: It’s important to consider market trends, economic conditions, and the company’s fundamentals when determining whether a stock is overbought.

We have used a mix of these tools to highlight some of the most overbought stocks this season, in addition to oversold stocks that could help you make money. Be a PRO member today to access the list and protect your funds.

💰 Be a Better Investor

The key to money is to stay invested.

Suze Orman

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