J.D. DURKIN: Good morning, Action Alerts Plus subscribers. Chris Versace and I are now back once again to get you ready for a busy week with the Fed set for yet another decision on Wednesday. And, of course, just before that decision AP will be live to put the year in review and talk all about what is next and our monthly members call at 12 o'clock Eastern on the very same day. However, before we get too ahead of ourselves this week, Chris, let's talk about last week, not so quiet either. You exited Chipotle, initiated Morgan Stanley, and you added to club positions in names like PepsiCo, Marvell, and XLE. I'm curious to your thinking on energy these days, been a while since we last saw that type of action. Break down your timing on all of this.

CHRIS VERSACE: Yeah, I mean, it has been a little bit since we've kind of made several moves all at once. But, remember, we're trying to be very pragmatic, prudent, careful, if you will, given the melt up in the market. And when we think about the significant outperformance that we saw in Chipotle-- it's one thing to sit on the sidelines and watch stocks go higher-- of course, we love that-- but we also want to make sure that we're booking those gains because as we know we've, again, we've had a very strong market rally, we're a little overbought, market appears to be very complacent when we look at where the VIX current-- is currently trading. There are reasons that we want to take gains off the board. And then, of course, we can redeploy them in some positions that we've been keeping our eye on.

You alluded to Morgan Stanley. This is the one that members know we've been watching for some time now. The key for us is really seeing that firming in the IPO market now for 2024 but also the prospect for lower interest rates, that bodes well for the company's investment management business. So when we looked at that, the risk/reward was a little better than neutral. So we started a position recognizing that we'll want to add to it if we see the shares pull back a little bit.

As far as Marvell, we laid that out previously. PepsiCo just taking advantage of the strength in the market as new data tells us that, yes, people are coming back in and eating at home. And for the energy-- well, look, energy's-- energy and oil in particular have gotten pretty hard hit. We know that the expansion of OPEC+ production cuts-- glad I got that out in one take-- are going to start coming on stream in just a few weeks. So for a variety of reasons, we wanted to be pragmatic but opportunistic.

J.D. DURKIN: Can I ask you about XLE a little bit as a follow-up? That was the worst performing sector of the last week, down more than 3%. Materials also down, but talk to me about what your thinking is specifically for XLE.

CHRIS VERSACE: Yeah, so, again, with XLE, which is our play through an ETF on overall energy, we've been sitting in watching the fall over the last several weeks in overall oil prices-- concern about the speed of the economy, excess supply, those sort of factors. And, again, we're going to continue to monitor those. But as I just mentioned, the real key for us was the recognition that in two, three weeks time, as we move into 2024, it's not just going to be Saudi Arabia that is dialing back its production. In fact, they extended their production cuts. It's this incremental production cuts that's really going to start to, I think, call back into focus, not just demand, but overall supply.

And, of course, too, when we chatted with AAPT team member Carley Garner, she, of course, pointed out the seasonal downtrend that we tend to see in oil in particular that tends to bottom out around this mid-December or so. So putting those together looking at the potential reward that we could see versus incremental downside risk, we opted to nibble a little bit on XLE shares last week.

J.D. DURKIN: Chris, you've been really cognizant of challenges to the ongoing Goldilocks narrative. How does Friday's jobs report fit in?

CHRIS VERSACE: Well, I think we have to be vigilant, J.D. . We know that the market has been very, very strong. I mentioned earlier that it's incrementally looking overbought, complacent, those sorts of things. So we-- as much as we're enjoying the run-up in stocks-- we love it, of course, for, not only ourselves and the portfolio, but for members as well-- but we have to be mindful of what could go wrong, what could force the market to give some of those gains back-- so, again, constantly vigilant on that front.

And it's interesting that you ask about Friday's employment report because were the number of jobs created during the month of November stronger than expected? Yes, they were. And did wages come in a little hotter than expected? Yes, they did. But the market shrugged it off. And I think what that tells us is it's really looking forward to what we learned this week. We've got a couple of things coming. Not only do we have the November CPI, we've, of course, got the Fed decision, latest economic projections, and then later in the week we have some other economic data as well that'll tell us more about the true speed of the economy.

J.D. DURKIN: So let's talk about some of that economic data. You mentioned CPI, we'll also get PPI. FOMC will have those Tuesday, Wednesday, right around the time of their decision. What will you be looking for specifically in those inflation data points?

CHRIS VERSACE: So I'll tell you what the market is looking for first, then I'll tell you what we're looking for. So when you look at core CPI, the market consensus has it up 4% year-over-year, still quite a distance from the Fed's 2% target and up sequentially month-over-month. Now, it's going to be real simple. If we get a print that is below what the market expects, i.e. Weaker than expected, that's going to help support the Goldilocks narrative. That'll be good for stocks.

If we get something that is hotter than expected, and by that I mean it comes in ahead of the consensus forecasts, that is going to push back on the Goldilocks narrative. So it's going to be-- again, like we've seen with some other data points from time to time, it's going to be a very, very much a binary outcome, one or the other. And here's the thing. If we get a softer print for the CPI, especially the core CPI, that's going to give the Fed a little bit more room to get perhaps incrementally dovish when they conclude their meeting on Wednesday afternoon.

J.D. DURKIN: All right, so let's go there. That's the main event itself, the big card battle. The Fed keeping things as they are is all but guaranteed. But with bits and pieces we may hear about what's next for Chairman Powell's press conference, talk to me about what you will be looking for either in the statement, the dot plot, or the question and answer-- so many things to talk about there.

CHRIS VERSACE: So many things. And you're right-- I mean, we're going to get three big things. The first is going to be the policy statement, which we all know that the Fed is not expected to do anything. The second is going to be the presser or Fed Chair Powell's press conference-- again, a lot of color we tend to get there. But the thing that we'll be focusing on the most will be the Fed's economic projections because they're going to update what they're thinking for 2024-2025. But it's going to be the updated forecast, J.D. , for 2024 that's going to matter most. Yes, what they say about the GDP will be important, but it's what they say about the Fed funds rate that will be crucial. And I say that because the market currently expects, not two, not three, but somewhere between four and five rate cuts in 2024. So when we get that updated set of projections, we will see, hmm, is the market right and I'm not sure that it is or does the Fed see something less, which tells us that, yes, once again the market's out over its skis. And trust me, the market is not going to like that. And it could be a reason why this overbought, complacent market potentially gives some of its gains back. And that would be a good thing in our opinion.

J.D. DURKIN: All right given the possible volatility, Chris, can you give members a bit of a quick reminder of the game plan for a week like this?

CHRIS VERSACE: Well, like I said, if we do get a pullback in the marketplace, we would welcome that. That would take some of the froth out of the market, allow us to buy some positions at better prices, perhaps even call up some additional companies out of the bullpen into the portfolio. So we're actually looking forward to that. But if it does get a little wobbly, remember, members, we have cash on hand and we continue to hold our inverse ETFs. And I know we'll get questions on this. Remember, we're waiting for the Fed to become dovish in their tone, that's when we're going to contemplate exiting our inverse ETFs, depending on what the technical setup is in the market at that time.

J.D. DURKIN: Chris, before we conclude here today on this rainy Monday, is there anything else members should be mindful of?

CHRIS VERSACE: Just that-- I know there's a lot of focus on what's ahead of us Tuesday, Wednesday, but let's remember that there is stuff that happens Thursday, Friday. And for Thursday, we do have a couple of things. First and foremost, we're going to get the November retail sales. And, yes, we always tend to look at this as it relates to GDP and the consumer. But let's remember, folks, this is going to be an especially important retail sales report because it's going to give us a bit of an update on the holiday shopping season. After the close on Thursday, we, of course, got earnings from Costco. And then Friday, we have the December flash PMI. Yes, it's a lot earlier than it typically is. It may not be quite as insightful, but we will be mining it for what it says about the end of 2023 and how the US economy might start off 2024.

J.D. DURKIN: And we will closely be following it as well. Chris Versace, that's it for today. Thanks for taking the time as always.

CHRIS VERSACE: Any time, J.D. . Thank you.

J.D. DURKIN: Folks, that man, Chris, will be back tomorrow for his reaction to CPI and much more. Happy trading. Until we see you again soon, take care.