MONDAY 31 JULY TO FRIDAY 04 AUGUST 2023

(Excerpts from Briefing.com, tradingeconomics.com, marketwatch.com, CNBC )

Indices Snap 3-Week Bull Run

It was a huge week of earnings that resulted in stock market losses. Apple (AAPL) and Amazon (AMZN) were the earnings reports that carried the most market-moving weight. Those reports garnered mixed reactions from investors, propelling shares of Amazon 8.3% higher on Friday while Apple fell 4.8%.

Overall, the price action this week was driven by a big jump in long-term rates that provided an excuse for participants to take some money off the table in a short-term overbought market.

The factors that drove the move in rates included supply concerns and the continuation of relatively strong data that support the view that the Fed is apt to keep rates higher for longer and may yet find reason to raise the policy rate again.

Still, the Fitch Ratings downgrade of U.S. credit to AA+ from AAA stole the show as a talking point when it comes to discussing the move in rates. The downgrade reflected the expected fiscal deterioration over the next three years, growing government debt, and erosion of governance related to peers.

Market rates actually declined following the downgrade, but shot higher immediately following the much larger-than-expected increase in ADP private-sector payrolls.

Treasuries started to widened their losses after the release of a better than expected report on productivity and unit labor costs on Thursday. Weekly initial jobless claims increased slightly, but still reflect a strong labor market. Meanwhile, the ISM Non-Manufacturing Index showed that services sector growth decelerated in July. 

On Thursday, the 10-yr note yield settled just 14 basis points shy of its high from October while the 30-yr yield was just 12 basis points below last year’s high.

Yields ultimately backpedaled from their highs in response to the July Employment Situation Report, which showed a slowdown in nonfarm payroll growth that had the market considering the idea that it may be enough to keep the Fed on hold. The 10-yr yield closed nine basis points higher on the week to 4.06%. The 30-yr yield jumped 18 basis points to 4.21%. 

The highest probability that the market is assigning for another Fed rate hike at any of the remaining meetings this year is just 27.7% for the November FOMC meeting, according to the CME FedWatch Tool.

On a central bank related note, the Bank of England announced a 25 basis points rate hike to 5.25%.

Only one of the S&P 500 sectors logged a gain – energy (+1.2%) – while the utilities (-4.7%), information technology (-4.1%), and communication services (-2.9%) sectors saw the largest declines. 

Below are truncated summaries of daily action:

Monday:

The stock market spent most of the session trading flattish at the index level. The major indices eked out slim gains, though, on the last session of the month due to a nice move higher in the last 10 minutes of trading. The Russell 2000 paced index gains by a decent margin, rising 1.1%.

Many stocks participated in the late afternoon climb. The market-cap weighted S&P 500 rose 0.2%; the Invesco S&P 500 Equal Weight ETF (RSP) rose 0.3%; and the Vanguard Mega Cap Growth ETF (MGK) rose 0.1%.

In the early going, the major indices largely traded in narrow ranges near their flat lines as participants looked ahead to a busy week of earnings. There’s also some market-moving economic data, including the July ISM Manufacturing Index on Tuesday, the July ISM Non-Manufacturing Index on Thursday, and the July Employment Report on Friday.

Even when the major indices were flattish, market breadth still reflected a positive bias. Advancers led decliners by a 5-to-2 margin at the NYSE and a 5-to-3 margin at the Nasdaq.

Reviewing Monday’s economic data:

• Chicago PMI rose to 42.8 in July (consensus 43.0) from 41.5 in June

Tuesday:

The stock market encountered some selling pressure to begin the new month. Downside moves, though, were relatively modest. Selling interest was fueled by rising market rates and the feeling that the market is due for some consolidation. With Tuesday’s losses, the S&P 500 was still up 19.2% for the year.

The Dow Jones Industrial Average outperformed (+0.2%), closing with a slim gain thanks to a big move higher in Caterpillar (CAT), which reported pleasing quarterly results.

Some other notable companies that reported earnings endured sizable losses. Norwegian Cruise Line Holdings (NCLH), ZoomInfo Technologies (ZI), and Uber (UBER) were among the standouts in that respect after reporting less than perfect results and/or guidance. The aforementioned stocks sold off after seeing big gains in the months leading up to their reports.

The action in the Treasury market created a headwind for equities. The 10-yr note yield settled back above 4.00%.

Reviewing Tuesday’s economic data:

• The S&P Global US Manufacturing PMI rose to 49.0 in the final July reading from 46.3 in the prior reading.\
• The July ISM Manufacturing Index rose to 46.4% in July (consensus 46.8%) from 46.0% in June The dividing line between expansion and contraction is 50.0%, so the sub-50.0% reading for July reflects a general contraction in manufacturing activity for the ninth straight month, albeit at a slower rate than the pace of contraction in June.
  • The key takeaway from the report, other than the manufacturing sector continuing to operate in a state of contraction, is that there are more signs of employment reductions in the near term to better match production. Those reductions are in-line with the Fed’s thinking that its rate hikes will lead to some softening in the labor market.
• Total construction spending increased 0.5% month-over-month in June (consensus 0.6%) after increasing an upwardly revised 1.0% (from 0.9%) in May. Total private construction was up 0.5% month-over month while total public construction rose 0.3% month-over-month. On a year-over-year basis, total construction spending was up 3.5%.
  • The key takeaway from the report is that residential spending continues to be powered by new single family construction to meet demand that cannot be satisfied through the existing home market.
    JOLTS job openings totaled 9.582 million in June following a revised total of 9.616 million in May (from 9.824 million)

Wednesday:

Wednesday’s trade featured an orderly stock sell off with mega caps and growth stocks pacing broad based losses. The catalyst that drove selling interest was a jump in market rates, which gave inventors an excuse to take some money off the table in a market that is overbought on a short-term basis.

Market rates had been moving lower, though, in overnight action despite the news that Fitch Ratings downgraded its U.S. credit rating to AA+ from AAA. The downgrade reflected the expected fiscal deterioration over the next three years, growing government debt, and erosion of governance related to peers.

Treasury yields started to climb, however, immediately after the cash open, turning sharply higher around 8:15 a.m. ET with the release of the ADP Employment Change Report. The jump in Treasury yields briefly sent the 10-yr yield past its high from July (4.094%) to a level not seen since early November.

Ultimately, yields backpedaled from their highs. 

Pressured by the rising rates, mega cap stocks saw disproportionate selling interest, which led to a 2.1% loss in the Vanguard Mega Cap Growth ETF (MGK).

Reviewing Wednesday’s economic data:

• The weekly MBA Mortgage Applications Index fell 3.0% with purchase applications falling 3.0% and refinance applications also falling 3.0%
• The ADP Employment Change showed a 324,000 increase in private sector payrolls in July (consensus 185,000) following a revised 455,000 increase in June (from 497,000).
• The weekly EIA crude oil inventories showed a draw of 17.1 million barrels after last week’s draw of 600,000 barrels.

Thursday:

The stock market had a mixed showing with price action in the mega cap stocks driving a lot of the index level movement. The major indices exhibited losses right out of the gate, but climbed into positive territory by mid-day.

Market participants were digesting a huge batch of news, including a huge slate of earnings reports since Wednesday’s close, an uptick in selling interest in longer-dated Treasuries, a 25-basis points rate hike by the Bank of England to 5.25%, and more chatter about the downgrade of the U.S. credit rating by Fitch Ratings.

Treasuries started to widened their losses after the release of a better than expected report on productivity and unit labor costs. Weekly initial jobless claims increased slightly, but still reflect a strong labor market. Meanwhile, the ISM Non-Manufacturing Index showed that services sector growth decelerated in July.

Ultimately, the major indices closed with slim losses, showing some resilience amid ongoing calls for a pullback. Market breadth was negative, but modestly so. Decliners had a 3-to-2 lead over advancers at the NYSE and an 11-to-10 lead at the Nasdaq.

Reviewing Thursday’s economic data:

• Q2 Productivity-Prel 3.7% (consensus 1.7%); Prior was revised to -1.2% from -2.1%; Q2 Unit Labor Costs-Prel 1.6% (consensus 2.7%); Prior was revised to 3.3% from 4.2%
  • The key takeaway from the report is that the pickup in productivity and the deceleration in unit labor costs is a good combination for the soft-landing view.
• Weekly Initial Claims 227K (consensus 225K); Prior 221K; Weekly Continuing Claims 1.700 mln; Prior was revised to 1.679 mln from 1.690 mln
  • The key takeaway from the report is that initial claims – a leading indicator – are not leading anyone to think yet that the labor market is cracking under the weight of the Fed’s prior rate hikes, which is important because a strong labor market is key to a more upbeat economic outlook.
• July S&P Global US Services PMI – Final 52.3; Prior 54.4
• June Factory Orders 2.3% (consensus 2.0%); Prior was revised to 0.4% from 0.3%
  • The key takeaway from the report is that business spending was on the softer side in June, evidenced by the slight 0.1% increase in new orders for nondefense capital goods excluding aircraft.
• July ISM Non-Manufacturing Index 52.7% (consensus 53.0%); Prior 53.9%
  • The key takeaway from the report is that services sector activity continued to expand in July, but at a slower pace than the prior month. Even so, the report said that the majority of respondents remain cautiously optimistic about business conditions and the economy.

Friday: 

The major indices saw somewhat choppy action on Friday as participants digested a slate of factors. Market participants were reacting to the earnings results from Apple (AAPL) and Amazon (AMZN), the July Employment Situation Report, and falling Treasury yields.

The pullback in market rates was in response to the jobs report, which showed a slowdown in nonfarm payroll growth that has the market considering the idea that it may be enough to keep the Fed on hold. The 2-yr note yield fell 12 basis points to 4.78% and the 10-yr note yield fell 13 basis points to 4.06%.

Stocks found some upside momentum shortly after the open when the S&P 500 bounced off the 4,500 level. The major indices were trading up until selling increased in the afternoon trade. There was no specific catalyst to fuel the afternoon selling, but profit-taking activity was likely a driving factor. Ultimately, the major indices closed near their lows of the day, which had the S&P 500 below 4,500.

Reviewing Friday’s economic data:

• Non-farm payrolls rose by 187,000 in July (consensus 200,000) following a revised increase of 185,000 in June (from 209,000).
• Non-farm private payrolls rose by 172,000 in July (consensus 175,000) following a revised increase of 128,000 in June (from 149,000).
• Average hourly earnings rose by 0.4% in July (consensus 0.3%) following a 0.4% increase in June.
• The unemployment rate fell to 3.5% (consensus 3.6%) from 3.6% in June.
• The average workweek fell to 34.3 hours (consensus 34.4%) from 34.4.
  • The key takeaway from the report is that labor supply continues to be tight, which could make it difficult to achieve a more Fed-pleasing moderation in wage growth. That might not translate into another increase in the target range for the fed funds rate, but it does fit the notion that the Fed will be inclined to keep the policy rate higher for longer.

• Dow Jones Industrial Average -1.1% from last week, +5.8% YTD
• S&P 500 -2.3% from last week, +16.6% YTD
• Nasdaq Composite -2.8% from last week, +32.9% YTD
• Russell 2000 -1.2% from last week, +11.1% YTD

Boosted by Slowing Employment Growth

U.S. Treasuries rallied on Friday, lifting the 5-yr note and shorter tenors into positive territory for the week while 10s and 30s trimmed their losses from the past three days. The trading day started with modest losses in shorter tenors, but the entire complex charged higher after the Employment Situation report for July showed a continued moderation in payroll growth with non-farm payrolls (actual 187,000; consensus 200,000) missing estimates. The report also contained downward revisions to figures from the past two months, but average hourly earnings continued increasing at an expected pace. Commenting on the report, Atlanta Fed President Bostic said that there is no need for additional rate hikes since employment growth is slowing at a gradual pace. However, Mr. Bostic will not be an FOMC voter until next year. The post-data rally in Treasuries continued at a brisk pace into the late morning while the early afternoon saw a sideways drift near highs. Today’s advance pressured yields on 10s and 30s from fresh 2023 highs while the 2-yr yield dipped to its lowest level in more than two weeks. This week’s action alleviated some of the pressure on the 2s10s spread, which expanded by 18 bps to -73 bps while the 5s30s spread returned into positive territory for the first time since mid-June as the long end adjusted to rising inflation expectations and increased funding needs.

Bond Yields after the close on Friday 04 August:

• 3-mth: Unchanged at 5.54% (+2 bp for the week)
• 2-yr: -12 bps to 4.78% (-9 bps for the week)
• 5-yr: -15 bps to 4.15% (-3 bps for the week)
• 10-yr: -15 bps to 4.05% (+9 bp for the week)
• 30-yr: -11 bps to 4.21% (+18 bp for the week)

The yield curve pivoted on its belly in Week 31 with the short-term maturity yields falling while the long-term maturity yields rose, flattening the key inversions for the week.

10-YEAR/2-YEAR

The inverted 2-year/10-year yield spread narrowed to -73 bps from -91 bps the previous week on Friday 28 July 2023.

• The current inversion of the 2/10 which began on Tuesday 5 July 2022 is now two-hundred and seventy-four sessions old, making it the longest period of inversion in more than 45 years.
• The current inverted 2y/10y spread at -107 bps, printed on Wednesday 08 March 2023, surpassed the previous widest spread printed on Tuesday 07 March 2023 at -103 bps. 
• One needs to go back all the way to October 1981 to see a steeper inversion than the current one.

The inversion of the 2/10 spread has heralded economic recessions/slow-downs, six months to a year ahead of almost every historical recession. 

10-YEAR/3-MONTH

The inverted 3-month/10-year yield spread narrowed to -149 bps from -156 bps the previous week.

• The inverted 3m/10y spread that began on 25 October, is now one hundred and ninety-five sessions old, making it the steepest and longest inversion more than 45 years.
• -189 bps printed on Thursday 01 June and Thursday 04 May is the widest inverted spread on the 3m/10y, surpassing the -188 bps printed on Wednesday 01 June and Wednesday 03 May 2023.
• -189 bps surpasses all the previous inverted 3m/10y spreads over the past 50+ years.

Historically, when the 3-month maturity yields more than the 10-year maturity with a minimum holding period of 10 straight days, a recession followed 6 to 18 months later with most of those recessions being Hard Landings.

10-YEAR/FED FUNDS RATE

The inverted 10-year/Federal Funds Rate spread narrowed to -113 bps on Thursday 03 August from -137 bps the previous Friday 28 July 2023.

• The current 10y/FFR inversion which began on Tuesday 15 November 2022 is one hundred and seventy-nine sessions old.
• The -171 bps spread on Thursday 04 May 2023 surpasses the -153 bps spread printed on Wednesday 05 and Thursday 06 April 2023 as the widest of the current inversion in over 22 years.
• The current inversion has surpassed the previous two inversions;
  • May 2019 to March 2020
  • July 2006 to January 2008
• One needs to go back to 02 January 2001 for a deeper inversion when the 10-year/FFR was at -175 bps.
• By my estimation, the inverted 10y/FFR spread would have widened to -128 bps on Friday 04 August 2023.

Since 1970, whenever the 10-year maturity yield fell below (inverted) against the Federal Funds Rate, a recession followed about a year later accompanied by a downturn in the financial markets. Over recent years, the holding period to qualify this inversion has varied widely, ranging between a couple of weeks to three quarters.

DXY Extends Losses after Jobs Report

The US Dollar Index, eased to 102 on Friday, slipping for the second straight session after data pointed to the US economy cooling. Nonfarm payrolls expanded by 187K in July, less than market expectations of a 200K increase but the unemployment rate unexpectedly fell to 3.5% and wage growth slowed less than expected. Still, the dollar is on track to gain for the third straight week as strong US economic data and rising Treasury yields supported the currency. A recent downgrade in US credit rating also raised concerns about the fiscal outlook, driving a flight toward the safe-haven dollar. The greenback weakened against major currencies on Friday, with the most pronounced selling activity against the euro, Aussie and NZD dollar.

• EUR/USD: Lower by -0.1% to 1.1008 from 1.1014 the previous week, +8.1% YoY
• GBP/USD: Lower by -0.8% to 1.2751 from 1.2847 the previous week, +5.6% YoY
• USD/JPY: Higher by +0.4% to 141.76 from 141.16 the previous week, +5.0% YoY
• USD/CNY: Higher by +0.5% to 7.1879 from 7.1489 the previous week, +6.2% YoY
• USD/SGD: Higher by +0.6% to 1.3392 from 1.3304 the previous week, -3.0% YoY

Euro Rebounds after US Payrolls Weigh on the USD

The Euro rebounded to above $1.1 after the payrolls report showed signs of a cooling labour market in the US, pressuring the USD and bond yields lower. In Europe meanwhile, fresh PMIs indicated a further slowdown in the services sector and a larger contraction in manufacturing. Still, the Euro Area GDP returned to growth and expanded at a faster-than-expected 0.3% in the second quarter, beating forecasts of a 0.2% reading. Also, preliminary CPI figures showed headline inflation fell to 5.3%, the lowest since January 2022 and the core inflation was stable at 5.5%, remaining well above the ECB target of 2%. The ECB raised borrowing costs by another 25bps last month, and ECB President Lagarde reinforced during an interview with Le Figaro that there might be another interest rate hike or perhaps a pause in September.

Commodity prices had a mixed week with Crude Oil and Gold making gains while Nat Gas, Silver, Copper and Grains all lost.

The broad-based Bloomberg Commodity Index closed lower at 105.93, down -1.2% from 107.23 in Week 30, 2023. Year-to-date, the index is down -6.1%.

Wednesday 31 May 2023’s close at 97.96 is the lowest close since Thursday 25 May 2023’s close at 99.29, setting a new 52 week low close. It is also the lowest close since 31 December 2021 at 99.17.

Wednesday 31 May 2023 saw the index print a 52-week intraday low at 97.69 at 10.00am ET, surpassing the previous 52-week intraday low on Thursday 25 May at 98.79.

The index touched an intraday high of 138.16 on Wednesday 08 June 2022 and printed its highest close this year on Thursday 09 June 2022 at 136.61, +1.20% higher than its previous high close on 18 April 2022 at 134.99. 

Crude Oil Up for 6th Week

Crude oil futures rose after Saudi Arabia said on Thursday that it would extend its 1 million barrels per day production cut for another month, while Russia said it will also reduce its oil exports by 300,000 bpd in September. Meanwhile, OPEC+ kept oil output policy unchanged on Friday. Elsewhere, US crude inventories fell by a record 17 million barrels last week due to increased refinery runs and strong crude exports but at 439.8 million barrels, inventories are only 1% below the five-year average for this time of the year. On the demand side, concerns about a subdued recovery in China and most European countries continued to weigh on sentiment.

WTI crude futures settled at $82.82 per barrel while Brent futures settled at $86.24 per barrel on Friday to advance for the sixth consecutive week, their longest streak of weekly gains this year, underpinned by Saudi Arabia and Russia’s announcement that they would extend voluntary supply cuts through next month.

The settlement price spread between WTI and Brent decreased by -$0.41 to $3.42 from $3.83 the previous week on Friday 28 July 2023.

Baker Hughes total total U.S. rig count -5 at 659 (Prior: -5).

• WTI settled higher at $82.82/barrel from $80.58 the previous week (+2.7% YTD)
• Brent settled higher at $86.24/barrel from $84.41 the previous week (+0.2% YTD)
• Nat Gas settled lower at $2.58/MMBtu from $2.64 the previous week (-36.8% YTD)

Copper Declines from 3-Month High

Copper futures sank toward the $3.8 per pound mark, retreating after touching a near-three-month high of $4 on July 31st as a stronger dollar and concerns of low demand in China offset mounting supply pressures. PMI data from China continued to point to contractionary trends in the country’s construction and manufacturing sector, magnifying evidence that its economy is failing to recover from extended Covid lockdowns and raising concerns that economic support from the government will not be enough to add significant traction to industrial activity. Still, the decline was limited amid concerns that lower supply will coincide with higher demand for copper-intensive sustainable infrastructure in coming years, risking wide shortages. State-owned Chilean miner Codelco revised its output projections by 70,000 tonnes to 1.31-1.35 million tonnes this year due to explosions and delays in key mines, shortly after the giant reported that production in the first half of 2023 tanked by 14%.

Gold Rises Above $1,940, Prints Weekly Decline

Gold rose to settle above $1,970 an ounce on Friday rebounding from the recent lows as dollar weakened and Treasury yields retreated, following the US jobs report. The country’s economy added less jobs than expected in July, showing some signs of cooling in the labor market and supporting the case for the end of tightening campaign by Fed. Also, the weak business activity in Euro Area underpinned the demand for safe haven. Meanwhile, the Bank of England lifted its policy rate by 25 basis points on Thursday and warned that borrowing costs were likely to stay high, and a European Central Bank insisted on keeping the current elevated levels for longer. Weekly, the metal was still on track to lose more than 1%, its worst performance since late June.

Wheat Settles At 2-Month

Wheat futures sank to $6.3 per bushel in the first week of August, hovering near a two-month low and extending its volatile momentum amid evidence of ample supply from the world’s major producers, while markets continued to assess the impact that the destruction of port infrastructure and grain stockpiles in Ukraine may have on global trade. Top exporter Russia signaled another year of soaring harvests, overcoming previous concerns of dryness in Siberia and cushioning some of the lack of shipments from Ukraine. Elsewhere, the USDA’s weekly crop report on Monday indicated that the US winter wheat harvest is nearing its latter stages, which provided milling wheat to the market and offered some relief amidst the global supply concerns. The developments took place after some much-needed rain erased concerns that droughts would hamper crops in the Midwest region, lowering prices.

• Corn settled lower at $4.97/bushel, from $5.30 the previous week (-26.7% YTD)
• Wheat settled lower at $6.33/bushel, from $7.04 the previous week (-19.7% YTD)
• Soyabeans settled lower at $13.33/bushel, from $13.83 the previous week (-12.7% YTD)

World Food Prices Edge Higher in July

The FAO Food Price Index increased for the first time in three months to 123.9 in July 2023 from an upwardly revised 122.4 in June which was the lowest since April 2021. Prices for vegetable oils surged 12.1%, the first increase in eight months, driven by higher world quotations across sunflower, palm, soy, and rapeseed oils. On the other hand, sugar cost went down 3.9%, amid good progress of the 2023/24 sugarcane harvest in Brazil, and improved rains benefiting soil moisture conditions across most growing areas in India. Also, prices for cereals decreased 0.5%, due to a 4.8% fall in international coarse grain prices. Dairy cost declined 0.4%, a seventh straight month of declines, led by lower quotations for skim milk powder and butter, underpinned by subsided market activities in Europe during the summer holidays and muted interest in import demand in the months ahead due to market uncertainty over the future directions of prices. Meat prices also fell 0.3%, led by bovine meat.

Palm Oil 

Malaysian palm oil futures settled the week at MYR 3,865 per tonne after hitting a four-month high of near MYR 4,000 in early July, tracking weakness in rival oils amid uncertainty from the Black Sea grain deal. Meantime, top producer Indonesia has set its crude palm oil reference price at $826.48 per ton for August 1-15, higher than $791.02 for July 16-31, while keeping export tax and levy for the first half of the month. Palm exports from Malaysia in July rose 7.8% from the month before, according to AmSpec Agri, while cargo surveyor Intertek Testing Services (ITS) estimated a 14% rise for the same period. Still, hopes of strong demand from India capped the losses, with Reuters projecting edible oil imports from the country in July to hit a record 1.76 million tons as refiners build stockpiles ahead of domestic festivals. Meantime, the Malaysian Palm Oil Council forecast that benchmark palm oil prices to trade around MYR 3,700-4,200 in H2 of 2023 and will remain supported in the long term.

Baltic Dry Index Up for 2nd Day, Books Weekly Gain

The Baltic Exchange’s dry bulk sea freight index, which measures the cost of shipping goods worldwide, advanced for a second day on Friday, rising about 0.7% to 1,136 points. The capesize index, which tracks vessels typically transporting 150,000-tonne cargoes such as iron ore and coal, went up 0.8% to 1,818 points; and the panamax index, which tracks ships that usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, extended gains for an eighth straight session, adding 1.9% to 1,133 points. Meanwhile, the supramax index fell 7 points to 688 points. The benchmark index was up 2.3% for the week, its second straight weekly gain.

• • • • •

Asian Markets Mixed On Friday

Markets in the Asia-Pacific were mixed on Friday, with a recent downgrade in US credit rating and rising Treasury yields continuing to pressure equities. Shares in Australia and Japan declined, led to the downside by technology and other growth stocks. Meanwhile, growing optimism that Chinese authorities would offer more pro-growth policy measures to support the economy lifted shares in Hong Kong and mainland China.

The Nikkei 225 Index rose 0.1% to close at 32,193 while the broader Topix Index gained 0.28% to 2,275 on Friday, with both benchmarks finishing the week lower as a wave of risk-off sentiment spread throughout the market during the period following a US credit rating downgrade and a strong run-up in US Treasury yields. Investors also continued to track the yen and JGB yields after the Bank of Japan made adjustments to its yield curve control policy at last week’s meeting.

Hong Kong’s Hang Seng index rose 118.59 points or 0.61% to finish at 19,539.46 on Friday, snapping three-day losses, after China’s central bank vowed Thursday to pledge more financial resources to support the private economy while promising to flexibly use various policy tools to ensure ample liquidity in the system. A rise in US futures also supported risk appetite, as traders awaited crucial non-farm payrolls report due later today that could offer clues to the Fed’s policy path. The index pared its early gains, however, down 1.3% for the week, as signs of disinflation in China are becoming more prevalent amid weak demand from households and businesses. Meantime, private sector activity in Hong Kong shrank in July after growing in the prior six months, due to falls in output and new orders. Tech and consumers led the gains while property dropped and financials were sluggish.

The Shanghai Composite rose 0.23% to close at 3,288 while the Shenzhen Component gained 0.67% to 11,238 on Friday, with both benchmarks finishing higher for the second straight week, lifted by growing optimism that Chinese authorities would offer more pro-growth policy measures to support the economy. Investors also cheered data released this week showing Chinese services sector growth surprisingly accelerated in July, while manufacturing activity showed signs of improvement. Financial firms extended a rally as the Chinese government encouraged stock investing.

The S&P/ASX 200 Index rose 0.19% to close at 7,325 on Friday but still ended the week more than 1% lower, as a wave of risk-off sentiment spread throughout the market during the period following a US credit rating downgrade and a sharp rally in US Treasury yields. Domestically, investors continued to assess the economic and monetary policy outlook after the Reserve Bank of Australia unexpectedly held interest rates steady during Tuesday’s policy meeting. Mining and energy stocks mostly advanced on Friday while healthcare and technology stocks declined.

Singapore stocks end lower on Friday; STI down 0.4%

Losses on Wall Street overnight left local investors with nowhere to go but down on Friday. The benchmark Straits Times Index (STI) lost 0.4 per cent or 11.67 points to 3,292.39 although gainers beat losers 320 to 256 after 1.4 billion shares worth $1.14 billion changed hands.

The trio of local banks had a mixed day. UOB was the STI’s biggest loser, falling 3.4 per cent to $28.80 while OCBC lost 0.8 per cent to $12.94 after posting a 34 per cent rise in second-quarter net profit to $1.7 billion, which slightly missed estimates.

Bursa snaps three-day losing streak in tandem with regional uptrend

Bursa Malaysia snapped a three-day losing streak to close 0.23% higher on bargain-hunting, particularly for healthcare, financial services, and property counters, in tandem with the uptrend on most regional bourses on Friday (Aug 4).

The FTSE Bursa Malaysia KLCI (FBM KLCI) strengthened by 3.36 points to 1,445.21, from 1,441.85 at Thursday’s close. The barometer index opened 0.64 of a point higher at 1,442.49, and moved between 1,442.23 and 1,447.13 throughout the day. On the overall market, gainers beat losers 456 to 333, while 470 counters were unchanged, 1,017 untraded, and 26 others suspended.

Sector-wise, the Financial Services Index garnered 79.05 points to 16,142.02, the Energy Index edged up 1.50 points to 826.36, the Industrial Products and Services Index inched up 0.67 of a point to 166.50, and the Plantation Index slid 23.99 points to 7,080.71. The Main Market volume dwindled to 1.77 billion units valued at RM1.17 billion, from 2.11 billion units valued at RM1.42 billion on Thursday.

• Japan’s Nikkei: +0.1% (-1.7% for the week) +23.4% YTD
• Hong Kong’s Hang Seng: +0.6% (-1.9% for the week) -1.2% YTD
• China’s Shanghai Composite: +0.2% (+0.3% for the week) +6.4% YTD
• India’s Sensex: +0.7% (-0.7% for the week) +8.0% YTD
• South Korea’s Kospi: -0.1% (-0.2% for the week) +16.4% YTD
• Australia’s ASX All Ordinaries: +0.2% (-1.1% for the week) +4.4% YTD
• Malaysia’s FKLCI: +0.2% (-0.4% for the week) -3.4% YTD
• Singapore’s STI: -0.4% (-2.3% for the week) +1.3% YTD

European Stocks Rise, Post Weekly Fall

European equity markets closed mostly higher on Friday, after a three-day selloff, as upbeat earnings reports and positive U.S. job data balanced worries about slow growth in Europe. Among single stocks, French bank Credit Agricole climbed 6.1% as strong insurance and consumer finance results helped it report upbeat quarterly earnings. Credit Agricole rose 6.1% due to strong results and Italy’s Monte dei Paschi di Siena bank went up 2.8% after beating earnings expectations. On the other hand, advertising company WPP fell 3.4% because it lowered its growth forecast and Commerzbank lost 2.6% after saying costs would be higher and commission income lower.

For the whole week, the STOXX 600 index lost 2.4% and the German DAX retreated 3.1%, ending three weeks of gains.

UK Shares Rebound on Friday

Equities in London erased early gains and closed 0.5% higher at 7,570 on Friday, ending a three-session losing streak as a mixed US jobs report let European bonds enjoy some respite and halt this week’s plunge. Domestically, markets also continued to assess the BoE’s 25bps rate hike from the previous session. Two members of the MPC opted for a sharper 50bps hike and one other preferred a hold, suggesting that the combination of soaring inflation with plunging demand for mortgages and risks of economic contraction is resulting in dividing opinions on the best course of policy action. Gains were distributed among all key sectors of the London Stock Exchange, with BP and Shell both adding 2% on stronger crude oil prices. In the meantime, Rolls Royce surged 7.5% on a strong earnings report, as the return of international travel supported its aircraft engines. On the other hand, WPP tanked 3.5% after lowering its full-year revenue forecasts as higher interest rates curb tech spending.

• U.K.’s FTSE 100: +0.5% (-1.7% for the week) +1.5% YTD
• Germany’s DAX: +0.4% (-3.1% for the week) +14.6% YTD   
• France’s CAC 40: +0.8% (-2.2% for the week) +15.5% YTD
• Italy’s FTSE MIB: -0.4% (-3.1% for the week) +20.6% YTD
• Spain’s IBEX 35: +0.6% (-3.3% for the week) +13.9% YTD
• STOXX Europe 600: +0.3% (-2.4% for the week) +8.1% YTD

• • • • •

WEEK 32 – 07 TO 11 AUGUST 2023

In Week 32, all attention will be focused on the US inflation report scheduled for Thursday, while the earnings season continues. In the US, investors will also be keeping a close eye on producer prices and the Michigan Consumer Sentiment. Additionally, important events include China’s inflation and trade data, GDPP growth figures for the UK and the Philippines, an interest rate decision from the Reserve Bank of India, and inflation figures for Brazil and Mexico.

Benchmark Indices ($DJIA, SPX AND COMP 21-year average)

• Week 32 (07 to 11 August) starts flat-to-bullish and is mostly bearish for the rest of the week.
• The second week of August tends to be more bearish than bullish and uneventful.

Benchmark Index ETFs (DIA, SPY 19-Year Average & QQQ 13-Year Average):

• Week 32 (07 to 11 August) start bearish but turns bullish for the rest of the week.

Week 32 Key U.S. Economic Notes:

• Monday 07 August – Consumer Credit
• Tuesday 08 August – Trade Balance, Wholesale Inventories
• Wednesday 09 August – MBA Mortgage Applications Index, EIA Crude Oil Inventories
• Thursday 10 August – Initial Claims, Continuing Claims, CPI, Core CPI, Natural Gas Inventories, Treasury Budget
• Friday 11 August – PPI, Core PPI, UoM Consumer Sentiment-Prelim, WASDE August Report

In the United States, the flow of earnings releases is expected to slow down, but investors can still anticipate major reports from prominent companies such as The Walt Disney Co, AMC Entertainment, Novo Nordisk, Barrick Gold, Eli Lilly and Co, Take-Two Interactive Software, Twilio, and Upstart Holdings.

On the economic data front, all eyes will be on the CPI report scheduled for Thursday. Investors expect the inflation rate to accelerate to 3.3% from 3% in June, which would mark the first increase in headline inflation since June 2022, mainly reflecting base year effects from energy costs. The core rate is seen steady at 4.8%, remaining well above the Federal Reserve’s 2 percent target. Other crucial economic releases to watch for include the preliminary estimate of Michigan Consumer Sentiment, producer prices, foreign trade data, IBD/TIPP Economic Optimism Index, and the government’s monthly budget statement.

U.S. Economic Releases for Week 32

Monday 07 August

• June Consumer Credit (consensus $13.0 bln; prior $7.3 bln) at 15:00 ET

Tuesday 08 August

• July NFIB Small Business Optimism (consensus 92.1; prior 91.0) at 6:00 ET
• June Trade Balance (consensus -$65.1 bln; prior $-$69.0 bln) at 8:30 ET
• June Wholesale Inventories (consensus -0.3%; prior 0.0%) at 10:00 ET
• $42 bln 3-yr Treasury note auction results at 13:00 ET

Wednesday 09 August

• Weekly MBA Mortgage Index (prior -3.0%) at 7:00 ET
• Weekly crude oil inventories (prior -17.1 mln) at 10:30 ET
• $38 bln 10-yr Treasury note auction results at 13:00 ET 

Thursday 10 August

• July CPI (consensus 0.2%; prior 0.2%) at 8:30 ET
• Core CPI (consensus 0.2%; prior 0.2%) at 8:30 ET
• Weekly Initial Claims (consensus 230,000; prior 227,000) at 8:30 ET
• Continuing Claims (prior 1.700 mln) at 8:30 ET
• Weekly natural gas inventories (prior +14 bcf) at 10:30 ET
• $23 bln 30-yr Treasury bond auction results at 13:00 ET
• July Treasury Budget (prior -$227.80 bln) at 14:00 ET

Friday 11 August

• July PPI (consensus 0.2%; prior 0.1%) at 8:30 ET
• Core PPI (consensus 0.2%; prior 0.1%) at 8:30 ET
• Preliminary August University of Michigan Consumer Sentiment survey (consensus 70.9; prior 71.6) at 10:00 ET

In the Euro Area, the economic calendar will be soft, with investors awaiting the final CPI figures to confirm that Germany’s inflation rate slowed to 6.2% in July, while inflation in France moderated to a 17-month low of 4.3% and in Italy, it eased to a 15-month low. Conversely, the inflation rate in Russia is set to accelerate for the third consecutive month. Meanwhile, Russia’s GDP likely rebounded in the second quarter, marking a turnaround from the contraction that started last year. Other important data include Germany’s industrial production, Switzerland’s unemployment rate, and Turkey’s industrial output and jobless rate.

In the United Kingdom, the ONS will be publishing preliminary estimates for the second-quarter GDP, alongside reports on industrial production, construction output, and trade balance. Britain’s economy most likely sustained its growth momentum during the April to June period. 

In Asia-Pacific, China will release its second batch of July economic data, which includes trade figures, inflation rates, and a collection of credit data, after last week’s PMI figures magnified the country’s struggle to recover from Covid lockdowns.

In Japan, all eyes will be on the BoJ’s Summary of Opinions for insights on the bank’s decision to loosen its yield curve control policy.

Also on the monetary policy front, the RBI (India) is set to continue holding its tightening cycle, leaving interest rates steady, aligned with previous warnings that higher agricultural and energy commodities drive upside risks to the inflation rate. 

Elsewhere, South Korea will divulge trade figures and the Philippines will release its second-quarter GDP.

In Australia, investors await key forward-looking indicators, including August’s Westpac Consumer Confidence and July’s NAB Business Confidence, while New Zealand will release July’s manufacturing PMI.

International Economic Releases for Week 32

Monday 07 August

• Japan – BOJ Summary of Opinions, Leading Indicators
• Australia – ANZ Job Advertisements m/m
• UK – Halifax HPI m/m, MPC Member Pill Speaks, BRC Retail Sales Monitor y/y
• EU – 
  • Eurozone Sent Investor Confidence
  • German Industrial Production m/m

Tuesday 08 August

• Japan – Average Cash Earnings y/y, Household Spending y/y, Bank Lending y/y, Current Account, Economy Watchers Sentiment
• Australia – Westpac Consumer Sentiment, NAB Business Confidence
• China – Trade Balance, USD-Denominated Trade Balance
• EU – 
  • German Final CPI m/m
  • French Trade Balance

Wednesday 09 August

• Japan – M2 Money Stock y/y, Prelim Machine Tool Orders y/y
• China – CPI y/y, PPI y/y
• UK – RICS House Price Balance

Thursday 03 August

• Japan – PPI y/y
• Australia – MI Inflation Expectations
• China – New Loans, M2 Money Supply y/y
• EU – ECB Economic Bulletin

Friday 04 August

• UK – GDP m/m, Prelim GDP q/q, Construction Output m/m, Goods Trade Balance, Index of Services 3m/3m, Industrial Production m/m, Manufacturing Production m/m, Prelim Business Investment q/q, NIESR GDP Estimate
• EU – 
  • German WPI m/m
  • French Final CPI m/m
  • Italian Trade Balance

FactSet Earnings Insight – Friday 04 August AMC

At this late stage of the Q2 earnings season for the S&P 500, both the number of companies reporting positive earnings surprises and the magnitude of these earnings surprises are above their 10-year averages. As a result, the index is reporting higher earnings for the second quarter today relative to the end of last week and relative to the end of the quarter. However, the index is also reporting its largest year-over-year decline in earnings since Q3 2020.

Overall, 84% of the companies in the S&P 500 have reported actual results for Q2 2023 to date. Of these companies, 79% have reported actual EPS above estimates, which is above the 5-year average of 77% and above the 10-year average of 73%. This number also marks the highest percentage of S&P 500 companies reporting a positive EPS surprise since Q3 2021 (82%). In aggregate, companies are reporting earnings that are 7.2% above estimates, which is below the 5-year average of 8.4% but above the 10-year average of 6.4%.

During the past week, positive earnings surprises reported by companies in multiple sectors (led by the Consumer Discretionary, Health Care, and Information Technology sectors) were responsible for the decrease in the overall earnings decline for the index over this period. Since June 30, positive earnings surprises reported by companies in multiple sectors (led by the Consumer Discretionary and Information Technology sectors), partially offset by downward revisions to EPS estimates for a company in the Health Care sector, have been responsible for the decrease in the earnings decline for the index during this period.

As a result, the index is reporting higher earnings for the second quarter today relative to the end of last week and relative to the end of the quarter. The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report), year-over-year earnings decline for the second quarter is -5.2% today, compared to an earnings decline of -7.4% last week and an earnings decline of -7.0% at the end of the second quarter (June 30).

If -5.2% is the actual decline for the quarter, it will mark the largest year-over-year earnings decline reported by the index since Q3 2020 (-5.7%). It will also mark the third straight quarter in which the index has reported a year-over-year decrease in earnings.

Eight of the eleven sectors are reporting year-over-year earnings growth, led by the Consumer Discretionary and Communication Services sectors. On the other hand, three sectors are reporting a year-over-year decline in earnings: Energy, Materials, and Health Care.

In terms of revenues, 65% of S&P 500 companies have reported actual revenues above estimates, which is below the 5-year average of 69% but above the 10-year average of 63%. In aggregate, companies are reporting revenues that are 1.6% above the estimates, which is below the 5-year average of 2.0% but above the 10-year average of 1.3%.

During the past week, positive revenue surprises reported by companies in multiple sectors (led by the Health Care sector) were responsible for the increase in overall revenues for the index over this period. Since June 30, positive revenue surprises reported by S&P 500 companies in multiple sectors (led by the Health Care and Consumer Discretionary sectors), partially offset by downward revisions to revenue estimates for companies in the Energy sector, have been responsible for the increase in revenues for the index during this period.

As a result, the index is reporting higher revenues for the second quarter today relative to the end of last week and relative to the end of the quarter. The blended (year-over-year) revenue growth rate for the second quarter is 0.6% today, compared to a revenue growth rate of 0.1% last week and a revenue decline of -0.4% at the end of the second quarter (June 30).

If 0.6% is the actual growth rate for the quarter, it will mark the lowest year-over-year revenue growth rate reported by the index since Q3 2020 (-1.1%).

Seven sectors are reporting year-over-year growth in revenues, led by the Consumer Discretionary and Financials sectors. On the other hand, four sectors are reporting a year-over-year decline in revenues, led by the Energy and Materials sectors.

Looking ahead, analysts still expect earnings growth for the second half of 2023. For Q3 2023 and Q4 2023, analysts are projecting earnings growth of 0.2% and 7.6%, respectively. For all of CY 2023, analysts predict earnings growth of 0.8%.

The forward 12-month P/E ratio is 19.2, which is above the 5-year average (18.6) and above the 10-year average (17.4). It is also slightly above the forward P/E ratio of 19.1 recorded at the end of the second quarter (June 30).

During the upcoming week, 34 S&P 500 companies (including one Dow 30 component) are scheduled to report results for the second quarter.

Monday 07 August

• BMO: ACRS RCUS BNTX DK ELAN FRPT GENI GOGO HSIC KKR THS TSN VTRS
• AMC: ACVA ADTN ACM AYX AEL ARWR BRBR BYND CBT WHD CSWC CE CHGG COMP CXW CTRA WTRG EVCM FGEN FIVN FSK HLIO HPK HIMS ICUI INGN IFF JRVR JELD KMPR KD LCID MTW MNKD MRVI MED MRC NSA OKE PLTR PARA PAY PWSC PRAA PRI PRIM RNG SWAV SWKS SRC TDC VECO

Tuesday 08 August

• BMO: MASS AHCO ADT ALE ARMK ATKR GOLD BSY TECH BLUE BR CPRI CLBT CRNC CHH DDOG DUK DEA EHTH LLY EMBC EXK ENR NPO EVBG EXPD FOXA GLBE GFS HAE HR HLMN HNI HZNP INGR IRWD J SWIM LCII LI MAC MPW NYT NXST NOVT NVAX OLPX OGN PAYO PRGO PLTK RDNT QSR SEE SEAS MCRB SMRT SQSP STER TGLS TWKS TPG TDG UAA UPS WMG WOW ZTS
• AMC:  ME TWOU EGHT ACCO AGTI AKAM BIRD AMC AMPL ANGI ARRY AXON AZEK AZTA BW BBAI BL BLNK BHF BMBL CDRE CDNA CELH CPNG CRCT CTOS CUTR DAR DHT APPS DIOD BOOM DOCS DUOL BROS EBS EDR ESE EXFY FATE FNF FLT FLYW FNV GO HALO HCAT HL HRT HNST TWNK HBM IAC ICHR IOSP PODD IPAR NVTA IOVA IRBT JXN JAMF KLIC LZ LGND LNW LPSN LAZR LYFT MQ MASI DOOR MTTR MRTX MODN NHI LPRO OSCR PETQ PRA PUBM QGEN QDEL RXT RPD RLAY RVNC RVMD RIVN STR SLF SMCI SUPN TTWO TALO TTGT TOST MODG TWLO USPH UPST VVX VCYT VTLE VZIO VTEX VUZI WES ZIP

Wednesday 09 August

• BMO: DIBS DDD ATMU AVNS BLDP BERY BCO CAE CEVA CRL DCPH EBIX EVRI FA GEO GDRX INSW IONS JACK KRNT LFST LL NOMD ODP OGE OLK PENN REYN RBLX SHCR SSYS SLVM TBLA SKIN VVV VERX VSH WRBY WEN WE XMTR
• AMC:  ALRM AOSL APP AVTA AVID BBDC CACI CERT CLNE CDE CPA CYRX LAW ENS G HROW ILMN INFN JAZZ LGF.A RAMP MGNI MFC OEC ONL PAAS PAR PLUG PTRA PRPL QNST RPAY SONO SOVO STKL TASK TTEK TTD VRRM VSAT DIS WYNN XENE

Thursday 10 August

• BMO: AQN BABA AIT AZUL CYBR HBI HIMX HLLY IMCR KELYA DNUT NABL EYE PRMW RL SIX USFD UTZ WKME WWW YETI
• AMC:  ATGE ARLO RCEL FLO INDI NWSA ONTO SVV VTYX VIAV WPM YMAB

Friday 11 August

• BMO: SPB

Monday 07 August 2023

The second week of August tends to be more bearish than bullish and uneventful.

The Stock Trader’s Almanac’s stats for the Benchmark Indices for Monday of Week 32 over a 21-year average are;

• Dow Jones (DJIA): Bullish 57.1% 
• S&P 500 (SPX): Bullish 57.1% 
• NASDAQ (COMP): Bearish 61.9%

The Pattern Trader™ Tools Screener stats for the Benchmark Index ETFs for Monday of Week 32;

• SPDR DJIA ETF Trust (DIA – 19yr Avg): Bullish 57.89% 
• SPDR S&P 500 ETF Trust (SPY – 19yr Avg): Mildly Bearish 52.63%  
• Invesco QQQ Trust Series I (QQQ – 13yr Avg): Quite Bullish 69.23% 

Monday 07 August

• Japan – BOJ Summary of Opinions, Leading Indicators
• Australia – ANZ Job Advertisements m/m
• UK – Halifax HPI m/m, MPC Member Pill Speaks, BRC Retail Sales Monitor y/y
• EU – 
  • Eurozone Sent Investor Confidence
  • German Industrial Production m/m
• US – 
  • June Consumer Credit (consensus $13.0 bln; prior $7.3 bln) at 15:00 ET

Earnings on Monday 07 August

• BMO: ACRS RCUS BNTX DK ELAN FRPT GENI GOGO HSIC KKR THS TSN VTRS
• AMC: ACVA ADTN ACM AYX AEL ARWR BRBR BYND CBT WHD CSWC CE CHGG COMP CXW CTRA WTRG EVCM FGEN FIVN FSK HLIO HPK HIMS ICUI INGN IFF JRVR JELD KMPR KD LCID MTW MNKD MRVI MED MRC NSA OKE PLTR PARA PAY PWSC PRAA PRI PRIM RNG SWAV SWKS SRC TDC VECO

• • • • •

Friday 04 August 2023, AMC

From Thursday’s DMA;

“More fireworks to be expected on Friday as the market reacts to earnings from AMZN and AAPL along with the monthly jobs report. A technical bounce on the cards, maybe? I reckon it will be a wild ride with no clear direction that’s likely to end in a sell-off before the weekend.“

And that qualifies me to be a fortune teller again! LOL! But that call was such a common sense opinion given the state of the market and the players that have been moving it since last month. 

Last weekend;

“… based on the historical seasonal statistics and the technical hurdles in the coming week, I reckon the bulls have had their best chance to break out but have not mustered enough of a break for me to take seriously. It is very likely that this run is going to stall in the coming weeks.“

Just like that, Week 31 wipes out the previous three weeks’ of hard fought gains.

Those technical levels we talked about last week truly resisted any chance of a break out and sent prices reeling in the other direction on high-than-average volumes in Week 31. All the major indices are now sporting Bearish Engulfing patterns on their Daily and Weekly candle configurations.

If the benchmark indices don’t halt this correction in the coming week, their respective 50DSMAs will come calling very quickly, starting with COMP and followed by SPX.

Sector & Industry ETFs Summary

Energy was the only gainer is a week when all the other ETFs printed red.

• Utilities remains the worst loser YTD. It is rejoined this week by Health Care and Telecommunications.
• Technology and Utilities were the worst losers this week.
• Technology, Homebuilders and Discretionary remain the best gainers YTD for a twentieth straight week.
• Technology is still by far the stand-out winner YTD.

Shiller PE Ratio

The Shiller PE Ratio, as of Friday 04 August, is at 30.89, -3.3% lower than 31.94 the previous week, below double of its mean (17.05) and its median (15.93). At this level, the ratio is just below the middle between the historical high (44.19) and the mean or the median.

The U.S. market printed its second highest Shiller PE Ratio in its history at 40.00 in October 2021. The largest bubble remains as December 1999 at 44.19.

04 August 2023 AMC

Last weekend;

“… The coming week is expected to be one of the flattest weeks of the year so it will be a another test of the bulls’ resilience in continuing this run into the start of August.”

It would have been a rather flat-ish week had the market not sold down so viciously on Tuesday. Such was the overbought nature of the market after three weeks of gains … and there could be more to come.

“Earnings season continues to play havoc on the broader market and is set to continue its trend as we get into the second of two of the busiest weeks of the season.“

The bears are definitely back and in numbers. Another week like this and the one-month average will turn in favour of the DVOLs and Decliners.

Last weekend;

“… it’s up to the bulls to keep the buying going … something I reckon is going to be too much of a stretch in the coming week or two.“

That “stretch” was tested on Tuesday with dire results for the bulls. Now the average volumes keep rising with every bearish session. Continuity will be the name of the game in Week 32.

The CBOE Volatility Index (VIX), often referred to as Wall Street’s “fear gauge,” closed Week 31 at 17.10, +28.3% higher than the previous week’s close at 13.33.

• The VIX printed its 52-week intraday high on 28 September 2022 at 34.88.
• The highest close in the past 12 months is 11 October 2022 at 33.63.
• The lowest close in the past one year is currently 12.91, printed on 22 June 2023.
• The 52 week (intraday) low is 12.73 also from 22 June 2023.

Put/Call Ratios

Any reading above 1.00 is regarded as bearish. As a common practice amongst the professionals, it is worth noting that the big money indicators are reliably the Index and ETF Put/Call Ratios while the Equity Put/Call Ratios are mostly novice/amateur participation;

• Total Put/Call Ratio rose to 1.01 from 0.96 the previous week.
• Index Put/Call Ratios was unchanged at 1.29 from 1.29 the previous week.
• ETF Put/Call Ratios closed higher at 1.17 from 1.11 from a week ago.
• Equity Put/Call Ratios climbed to 0.66 from 0.56 the previous week.
• The CBOE VIX Put/Call Ratio dipped to 0.69 from 0.92 last week.

(Note: The VIX generally measures the options activity of the 500 S&P500 issues).

Price-to-price Divergence Still Increasing

From last weekend’s WMO;

“The dip-buying crowd is also back and picking up tech and mid-cap issues on any correction … the timing of this uptick couldn’t have picked a worse period in the calendar year to happen.“

And it did turn out to be a bad time to tick up because everything, save energy, came down in Week 31. 

As has been the story of this tech “bubble”, the correction in Week 31 was most damaging amongst the tech issues.

Earnings Season To Cool Off

From last weekend’s WMO

“… we can expect volatility to pick up even more in the coming week as this rock and roll concert belts out the noisiest and rowdiest part of its repertoire.“

I’m expecting things to cool off a bit in the coming week but it will heat up again by Thursday when the inflation numbers hit the market again. The VIX should get higher, so those of you who love shorting on high IV, wait for it because I suspect volatility is going to spike higher, much higher, in the coming weeks.

Happy Hunting!

Copyright© 2023 FinancialScents Pte Ltd

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

After 17 years of educating, mentoring and supporting hundreds of participants (annually) in the arts and sciences of Finance and Economics, the Pattern Trader™ Tutorial has evolved to become the most exclusive and sought-after boutique-styled class that caters to retail individuals, institutional professionals, businesses and families that are serious about their finances and their prospects as we move into the future.

Enriching, Fulfilling, Life Changing

The personal mentorship and tutorial-styled approach delivers a conducive environment that allows for close communication and interaction between the mentor and the participant. The hands-on style makes the Tutorial very practical for anyone who requires a start from the ground up. It is the perfect beginning for anyone who wishes to take that first step in improving their financial and economic literacy.

If you’re looking to make a huge difference in your financial life and get the most value for your education investment, there’s no better choice than the time-tested and well reputed Pattern Trader™ Tutorial

Download our promo slides here: The Pattern Trader™ Tutorial