| Take advantage of these big moves͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ |
Despite this past trading week being shortened due to Labor Day, it had enough trading action for a fu
Despite this past trading week being shortened due to Labor Day, it had enough trading action for a full week. It was a tough week for the markets as the S&P 500 index shed about 240 points in four consecutive down sessions. This wave of selling pressure was sparked by a weaker than expected August Jobs report re-stoking fears of a 'growth-scare' combined with further sector rotation out of certain pockets of the market, particularly Technology and Semiconductors. Investors have rotated out of the mega-cap Tech & 'Magnificent 7' stocks into more defensive areas like Consumer Staples, Utilities, & Real Estate. Large investors are taking this defensive positioning in the event that further economic weakness is on the horizon. Now, despite all the selling of the past week and strong sector rotation, taking stock of the broader market, the technicals are still holding up well. Of the S&P 500 stocks, still 67% are trading above their 200-Day moving average. This is a strong sign that the market is still in an overall uptrend and the recent selling at this point in time looks like the typical September choppy trading bump in the road. Additionally, the S&P 500 is only about 4.5% off of its all-time high, so the market is far from a full-on correction. Furthermore, after the market rose eight consecutive days in mid-August and remained rangebound for the following two weeks, it makes sense that the market is now giving up a bit of that move as some profit-taking is underway. It is possible that we will trade down a bit further from here and re-test the early August low, however, it is not our opinion that we will break below that low. At this point, the market is approaching various oversold levels so the closer that we trade to the August low, the more appealing strong trade setups will be. It is our opinion that once we get clarity from the Fed on their rate decision and approach the end of September and get back into a more liquid trading environment, the markets are more likely to regain their footing and trade higher as long as macro-economic data remains resilient.
Key Events to Watch this Week
- Inflation Reports (CPI & PPI)
- Consumer Sentiment
- ORCL, ADBE, & LEN Q2 Earnings
After last week's market rout, this coming week is likely to bring a bit more volatility as investors await the upcoming Fed meeting scheduled for September 18th. The market is still very unsure of whether the Fed will opt to lower rates by 25 or 50 basis points at the upcoming meeting. If there is anything that the market does not like, it is uncertainty. So, until this variable is removed from the equation and the path forward is more clear, it is reasonable to expect more choppy trading in the next few weeks. Now that the trajectory of inflation appears to be certainly trending down and back to the Fed's target of 2.0%, the inflation reports carry a bit less weight than they did just a few months ago. However, due to the uncertainty of whether the Fed will opt for a smaller or larger cut, this week's CPI and PPI inflation reports could be a key data point. If these reports show the inflation rate continuing to fall, a sign of further progress, this could encourage the Fed to opt for a larger cut since their current policy level has become quite restrictive. In addition to watching for these inflation reports, our team is also looking out for Friday's UMich Consumer Sentiment read. Sentiment rose last month but is still down sharply from the beginning of the year. If consumer sentiment continues to trend down, this could amplify concerns about a larger slowdown. Finally, as we wrap up Q2 earnings season, it has produced strong results with 79% of S&P 500 companies beating earnings. There are a few companies still outstanding who are yet to report their results. This week we will hear from Oracle Corp., Adobe Systems, Inc., & Lennar Corp. ORCL & ADBE earnings results will likely have an impact on the A.I. related stocks since both of these companies are closely connected to this market narrative. For LEN's report, this company is not expected to post strong earnings growth. We are more interested in their guidance & commentary around the housing market with rate cuts on the horizon.
Thank you for reading this week's edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week's important market events.
Thanks,
Blane Markham
Author, Weekly Market Periscope
Hughes Optioneering Team
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