MONDAY 21 TO FRIDAY 25 AUGUST 2023

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

Wild Week For Mega-Caps, Boring For Broader Market

It was a generally good week for the mega-cap names and a relatively lackluster week for the broader market. To wit: the market-cap weighted S&P 500 rose 0.8% this week while the Invesco S&P 500 Equal-Weight ETF (RSP) posted a fractional loss. The Russell 2000 was down 0.3% for the week and the S&P Midcap 400 Index was flat. The Nasdaq Composite gained 2.3% and the Dow Jones Industrial Average declined 0.4%.

With their gains this week, the S&P 500 and Nasdaq Composite broke a three-week losing streak.

There wasn’t a lot of consistency in the trading action this week, which saw its share of gyrations in a week accented with light volume and big news items that included the July Existing Home Sales and New Home Sales reports, the preliminary Manufacturing and Services PMI readings for August, NVIDIA’s (NVDA) earnings report, results from a large and diverse batch of retailers, and Fed Chair Powell’s policy-oriented speech at the Jackson Hole Symposium.

In brief:

• Existing home sales were slightly weaker than expected, impeded yet again by limited supply and affordability pressures from high mortgage rates.
• New home sales were slightly stronger than expected, driven by sales of more moderately priced homes as higher building costs crimped the supply of lower-priced homes while higher mortgage rates contributed to affordability pressures across the spectrum.
• The preliminary Manufacturing and Services PMI readings showed a deceleration in activity from July and an ongoing contraction in the manufacturing sector.
• NVIDIA delivered another blowout earnings report, replete with much stronger than expected guidance, yet the stock struggled to hold its gains after the report.
• The results from the retailers were a mixed bag but comments from Macy’s (M) about weakening consumer credit trends, and disappointing results and/or guidance from Dick’s Sporting Goods (DKS), Dollar Tree Stores (DLTR) and Foot Locker (FL) that were attributed in part to inventory shrink (i.e., theft), overshadowed good news from other reporters.
• Fed Chair Powell stuck by the Fed’s 2.0% inflation target; he reiterated that the process of getting inflation back down to 2.0% still has a long way to go; and he acknowledged that the Fed will raise rates again if it is appropriate. Nothing he hasn’t said before. What he didn’t say is that the Fed is thinking about cutting rates, yet that omission wasn’t a surprise either.

The best-performing sectors this week were information technology (+2.6%), consumer discretionary (+1.1%), and communication services (+1.0%). The commonality is that they all have mega-cap stocks under their roof. The energy sector (-1.4%) was the biggest decliner this week with oil prices fading some on continued concerns about China’s weakening economy.

That weakening prompted the PBOC to cut its one-year loan prime rate by 10 basis points to 3.45% on Monday and officials to urge financial institutions to assist in stabilizing the stock market. On a related note, Reutersreported Friday that China is planning to lower the duty on stock trading by 50%. China’s Shanghai Composite declined 0.6% on Friday and lost 2.2% for the week.

Separately, the Treasury market had its own gyrations this week. The 2-yr note yield saw a trading range that spanned from 4.92% to 5.10%. It settled the week at 5.03%, up 11 basis points for the week. The 10-yr note yield saw a trading range that spanned from 4.18% to 4.35%. It settled the week at 4.25%, down one basis point for the week.

The U.S. Dollar Index was up 0.8% for the week to 104.19.

Monday:

Stocks had a mixed showing today in a lightly traded session. Buy-the-dip action in the mega cap space led to the outperformance of the Nasdaq Composite (+1.6%) and helped limit losses elsewhere. The major indices had been drifting lower in the early going before bouncing off their lows around 12:00 p.m. ET with no specific news to account for the improvement.

Notably, Treasury yields, which had been rising and keeping pressure on stocks, started to pullback from their highs around the same time that the stock market hit its worst levels of the session. Ultimately, the major indices settled near their best levels of the day, which had the S&P 500 just a whisker shy of 4,400. The S&P 500 hit 4,407 at its high of the day.

The 2-yr note yield settled eight basis points higher at 4.99% after reaching 5.00% earlier. The 10-yr note yield rose nine basis points to 4.34%, which is its highest level since 2007, after hitting 4.35% earlier. The 30-yr bond yield rose eight basis points to 4.46%, hitting its highest level since 2011.

Mega cap stocks, which had already been outperforming due to buy-the-dip interest and presumably some safe haven trading, drove a lot of the late afternoon rally. The Vanguard Mega Cap Growth ETF (MGK) rose 1.5% while the Invesco S&P 500 Equal Weight ETF (RSP) closed flat.

Tesla (TSLA) and NVIDIA (NVDA) were top performers from the mega cap space. NVDA, which reports earnings after the close on Wednesday, traded up after HSBC raised its price target to $780 from $600. TSLA, meanwhile, had declined nearly 30% since its high July 19 coming into today.

S&P 500 sector performance was mixed. Information technology (+2.3%), the most heavily weighted sector in the S&P 500, outpaced the remaining ten sectors by a decent margin. Palo Alto Networks (PANW), which reported better than expected results after Friday’s close, was the largest percentage gainer in the sector. The interest rate sensitive real estate sector (-0.9%) saw the largest decline in today’s session.

Some angst ahead of Fed Chair Powell’s speech Friday at the Jackson Hole Symposium also contributed to the weakness in the Treasury market today after a Wall Street Journal article by Nick Timiraos discussed why the neutral rate may need to be higher.

Festering concerns about China’s disappointing growth remained a limiting factor for stocks today. On a related note, the People’s Bank of China lowered its one-year loan prime rate by ten basis points to 3.45% while the 5-yr rate was left unchanged at 4.20% against expectations for bigger cuts.

There was no U.S. economic data of note today, but tomorrow’s calendar features the Existing Home Sales report for July (Briefing.com consensus 4.15 million; prior 4.16 million) at 10:00 a.m. ET.

Tuesday:

Stocks had a mixed showing in another lightly traded session. Market participants were eyeing the price action in Treasuries again, which was somewhat spastic and helped to keep the stock market in check.

In the early going, relative strength from the mega cap space had been driving Nasdaq gains and limiting losses elsewhere. The S&P 500 for its part had been trading above 4,400 at its high of the day before quickly slipping below that level. The S&P 500 failed to breach 4,400 on a few retests, which invited more selling interest in the afternoon trade.

The major indices ultimately settled the session near their worst levels of the day. The Dow Jones Industrial Average fell 0.5%, the S&P 500 fell 0.3%, and the Nasdaq rose 0.1%.

Weak bank stocks were a notable overhang for the broader market after S&P downgraded the credit ratings of multiple banks, noting concerns about funding risks from rising rates and weaker profitability. Additionally, retailer Macy’s (M) talked about weakening consumer credit conditions in its business, and that acknowledgment was another weight on the banks. The SPDR S&P Regional Banking ETF (KRE) fell 2.4% and the SPDR S&P Bank ETF (KBE) fell 2.0%.

Macy’s was down sharply following its earnings report and Dick’s Sporting Goods (DKS) was another big loser after reporting earnings. Dick’s came up well shy of consensus earnings estimates and attributed its disappointing profits and guidance to inventory shrink (i.e. theft). Lowe’s (LOW) went against the grain, though, and posted a nice gain after its quarterly report. 

Homebuilders outperformed the broader market, boosted in part by an existing home sales report for July that continued to show a lean supply of homes for sale. The SPDR S&P Homebuilder ETF (XHB) rose 0.3%. The iShares U.S. Home Construction ETF (ITB) rose 0.8%.

The S&P 500 financials sector (-0.8%) saw the largest sector decline due to its weak bank components. The real estate sector (+0.3%), meanwhile, led the outperformers. 

Treasury yields declined overnight before nudging higher after the cash open. Yields ultimately settled below their highs of the day. The 2-yr note yield note yield rose five basis points to 5.04% and the 10-yr note yield fell one basis point to 4.33%.

Today’s economic data was limited to the existing home sales report for July. Existing home sales decreased 2.2% month-over-month in July to a seasonally adjusted annual rate of 4.07 million (consensus 4.15 million) from an unrevised 4.16 million in June. Sales were down 16.6% from the same period a year ago.

• The key takeaway from the report is that the inventory of existing homes for sale remains tight and affordability continues to be adversely impacted by rising prices and higher mortgage rates, all of which is also acting as moving deterrents for existing homeowners.

Wednesday:

Stocks had a strong showing today, supported by a drop in market rates and strong mega caps. The major indices all closed with gains ranging from 0.5% to 1.6%, although volume was still light at the NYSE. Today’s upside moves brought the S&P 500 back above 4,400, which acted an area of resistance yesterday. 

Market rates started to move lower overnight in response to a batch of soft August PMI data out of Europe. Treasuries extended their rally following the release of some softening Manufacturing and Services PMI readings for the US after the stock market opened. The 2-yr note yield fell 11 basis points to 4.93% and the 10-yr note yield fell 13 basis points to 4.20%.

NVIDIA (NVDA) was among the top performers from the mega cap space ahead of its earnings report after today’s close. Apple (AAPL) and Microsoft (MSFT) also logged sizable gains on no news. Those moves helped to fuel a 1.6% gain in the Vanguard Mega Cap Growth ETF (MGK) and a 1.1% gain in the market-cap weighted S&P 500. 

Market internals reflected fairly broad buying interest under the index surface. Advancers outpaced decliners by a 7-to-2 margin at the NYSE and a 2-to-1 margin at the Nasdaq.

Ten of the 11 S&P 500 sectors logged a gain led by information technology (+1.9%), which was boosted by its mega cap components. Communication services (+1.9%) was another top performer, drawing added support from a big gain in Netflix (NFLX) after it garnered some supportive comments from Oppenheimer. 

The energy sector (-0.3%) was the lone holdout in negative territory by the close.

Retailers headlined the earnings calendar since yesterday’s close. Foot Locker (FL) and Peloton (PTON) sank following their earnings results and/or guidance while Abercrombie & Fitch (ANF) registered an outsized gain after beating earnings estimates and raising guidance.

Reviewing today’s economic data:

• Weekly MBA Mortgage Applications Index -4.2%; Prior -0.8%
• August S&P Global US Manufacturing PMI – Prelim 47.0; Prior 49.0
• August S&P Global US Services PMI – Prelim 51.0; Prior 52.3
• July New Home Sales 714K (consensus 701K); Prior was revised to 648K from 697K
  • The key takeaway from the report is that new home sales activity, which is measured on signed contracts, was driven by sales of more moderately priced homes as higher building costs crimped the supply of lower-priced homes while higher mortgage rates contributed to affordability pressures across the spectrum.

Thursday:

The major indices closed with sizable losses on the heels of NVIDIA’s (NVDA) blowout earnings report that was replete with much better than expected Q3 guidance and a new $25 billion share buyback plan. Things looked different at the open, though, with many stocks building on yesterday’s gains. 

Mega cap stocks rolled over quickly, however, and never regained their opening momentum, which weighed heavily on the broader market. Ultimately, the major indices closed near their lows of the day, which left the S&P 500 below 4,400.

The disappointing price action after NVIDIA’s report likely caught many participants by surprise and became its own downside catalyst, which invited increased selling interest. The Vanguard Mega Cap Growth ETF (MGK), which had been up as much as 0.9% at its high, registered a 2.0% loss today. The Invesco S&P 500 Equal Weight ETF (RSP), which had been up as much as 0.6% earlier, closed with a 1.0% loss. 

Weak semiconductor stocks were another overhang for the broader market, falling prone to a sell-the-news reaction. The PHLX Semiconductor Index sank 3.4%. Even NVDA, which had been up as much 6.6% today, closed near its low of the day with a measly 0.1% gain.

Other notable laggards included Dow component Boeing (BA), which said a new flaw found in the 737 MAX will slow deliveries in the near term, T-Mobile (TMUS), which said it is going to cut approximately 7% of its staff, and Dollar Tree Stores (DLTR), which disappointed with its Q3 outlook.

All 11 S&P 500 sectors closed in the red with losses ranging from 0.2% (financials) to 2.2% (information technology).

Treasury yields settled slightly higher, keeping pressure on stocks, following another encouraging initial jobless claims report and ahead of Fed Chair Powell’s speech at the Jackson Hole Symposium on Friday about the economic outlook. The 2-yr note yield rose eight basis points to 5.01% and the 10-yr note yield rose four basis points to 4.24%.

Reviewing today’s economic data:

• Initial jobless claims decreased by 10,000 to 230,000 (consensus 240,000) for the week ending August 19 while continuing jobless claims decreased by 9,000 to 1.702 million for the week ending August 12.
  • The key takeaway from the report is that the leading indicator of initial claims is still leading the market to believe that the labor market remains tight, which is something that won’t escape the Fed’s eye.
• Durable goods orders declined 5.2% month-over-month in July (consensus -4.0%). Excluding transportation, durable goods orders increased 0.5% month-over-month (consensus 0.2%).
  • The key takeaway from the report, other than July’s weakness was driven predominately by transportation, was that business spending transpired at a tepid pace, evidenced by the 0.1% increase in new orders for nondefense capital goods excluding aircraft.
• Weekly EIA Natural Gas Inventories showed a build of 18 bcf versus a build of 35 bcf last week.

Friday:

The stock market had its ups and downs today, but ultimately, it finished the day in an upbeat manner that saw the major indices settle near their best levels of the session. The positive session, which came on another day of low volume, was in question shortly after Fed Chair Powell gave his much anticipated speech at the Jackson Hole Symposium. There were some efforts to spin that speech as being more hawkish than expected as the market retreated into negative territory, yet the speech didn’t contain any surprising revelations.

The Fed Chair stuck by the Fed’s 2.0% inflation target; he reiterated that the process of getting inflation back down to 2.0% still has a long way to go; and he acknowledged that the Fed will raise rates again if it is appropriate. These are all things he said following the last FOMC meeting.

His concluding remark that the Fed “…will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data” was a bit of a sticking point for the market, not because of what it revealed, but because of what it did not say. Specifically, there was no mention here, or anywhere in the speech, that the Fed is thinking about cutting rates.

Again, though, following the July 25-26 FOMC meeting the Fed Chair said it is unlikely that the Fed would cut rates this year, so the omission of any rate-cut possibility in today’s speech should not have been regarded as a truly hawkish omission.

Seemingly resigned to accept what it heard in the speech at its unsurprising face value, the stock market regrouped and got back on a winning track. It did so with the help of renewed buying interest in the mega-cap stocks and some generally broad-based buying interest that left all 11 S&P 500 sectors in positive territory by the closing bell.

The Invesco S&P 500 Equal-Weight ETF (RSP) increased 0.5%; the Russell 3000 Value Index added 0.5%; and the Russell 3000 Growth Index rose 0.7%.

The best-performing sectors were consumer discretionary (+1.1%), energy (+1.1%), industrials (+0.9%), information technology (+0.8%), and utilities (+0.8%). Gains for the other sectors ranged from 0.2-0.6%.

The communication services sector (+0.2%) was a relative laggard but deserves some praise for rebounding from a 1.7% loss at its worst levels of the day.

Boeing (BA) was the best-performing component in the Dow Jones Industrial Average one day after being the worst performing component in the Dow Jones Industrial Average. Today’s turnaround was helped by a Bloomberg report that Boeing is getting ready to resume deliveries of its 737 MAX to China. 25 of the 30 Dow Jones Industrial Average components finished higher.

Away from the stock market, the Treasury market endured its own gyrations. The 2-yr note yield went as high as 5.10% before settling at 5.05%, up four basis points from yesterday’s settlement. The 10-yr note yield touched 4.27% soon after Fed Chair Powell’s speech but settled the day unchanged at 4.24%.

Strikingly, the low for the S&P 500 today coincided roughly with the 10-yr note yield hitting its high for the day.

Reviewing Friday’s economic data:

• The final reading of the University of Michigan Consumer Sentiment Index for August came in at 69.5 (consensus 71.2) versus the preliminary reading of 71.2. The final reading for July was 71.6, which marked the highest level since October 2021. In the same period a year ago, the index was at 58.2.
  • The key takeaway from the report is that it consumers think the rapid improvements seen in the economy in the past three months have moderated, making them more tentative about the outlook.

• Dow Jones Industrial Average -0.4% from last week, +3.6% YTD
• S&P 500 +0.8% from last week, +14.7% YTD
• Nasdaq Composite +2.3% from last week, +29.8% YTD
• Russell 2000 -0.3% from last week, +5.2% YTD

Short End Pressured by Threat of More Hikes

U.S. Treasuries ended Friday on a mixed note, fitting this week’s divergent theme, with the long bond eking out a slim gain while the short end lagged. The 10-yr note and the long bond outperformed from the start while the 5-yr note and shorter tenors started the day with modest losses. The mixed start followed a night that saw the release of Japan’s latest Tokyo CPI (2.8% yr/yr), which showed the slowest rate of increase in eleven months, and Germany’s revised GDP report for Q2 (0.0% from -0.1%), which showed that the economy emerged from a shallow recession, though the likelihood of another dip is seen as high. Treasuries slumped to lows in the late morning, as the market responded to Fed Chairman Powell’s speech from the Jackson Hole Symposium. The Fed Chairman did not make any surprising comments, but he did reiterate that the FOMC is ready to hike again with a goal of holding policy at a restrictive level until there is confidence that inflation is slowing toward the 2.0% objective. The entire complex faced pressure in response to Fed Chairman Powell’s comments, which sent the 2-yr yield toward its July high (5.120%), but the pressure abated in short order with longer tenors seeing the strongest bounce while the threat of more rate hikes kept shorter tenors behind into the close. This week’s action put renewed pressure on the slope of the yield curve, widening the 2/10 spread by 12 bps to -78 bps from -66 bps last week.

Bond Yields after the close on Friday 25 August:

• 3-mth: +3 bps at 5.54% (+6 bp for the week)
• 2-yr: +5 bps to 4.92% (+11 bps for the week)
• 5-yr: +5 bps to 4.38% (+6 bps for the week)
• 10-yr: +2 bps to 4.26% (-1 bps for the week)
• 30-yr: unchanged at 4.30% (-8 bps for the week)

The yield curve pivoted on its belly in Week 34 with the short-term maturity yields rising as the long-term maturity yields fell, widening the key inverted spreads for the week.

10-YEAR/2-YEAR

The inverted 2-year/10-year yield spread widened to -78 bps from -66 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 eighty-nine 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 widened to -136 bps from -129 bps the previous week.

• The inverted 3m/10y spread that began on 25 October, is now two hundred and ten sessions old, making it the 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 widened to -110 bps on Thursday 24 August from -107 bps the previous Friday 18 August 2023.

• The current 10y/FFR inversion which began on Tuesday 15 November 2022 is one hundred and ninety-four 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 narrowed to -108 bps on Friday 25 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 Firms at 11-Week High, Books 6th Weekly Gain

The US Dollar Index rose to 104.2 on Friday, reaching its highest levels in eleven weeks and on track to advance for the sixth straight week as investors digested Federal Reserve Chair Jerome Powell’s Jackson Hole speech. Powell’s statement emphasized the US Federal Reserve’s commitment to bringing inflation back to 2% and stated that the central bank is ready to hike rates if needed. At the same time, Powell suggested the Fed could hold rates steady at its next meeting in September to assess the incoming data and the evolving outlook and risks.

• EUR/USD: Lower by -0.7% to 1.0794 from 1.0869 the previous week, +8.4% YoY
• GBP/USD: Lower by -1.2% to 1.2578 from 1.2728 the previous week, +7.1% YoY
• USD/JPY: Higher by +0.7% to 146.39 from 145.39 the previous week, +6.5% YoY
• USD/CNY: Lower by -0.2% to 7.2924 from 7.3007 the previous week, +5.8% YoY
• USD/SGD: Lower by -0.1% to 1.3556 from 1.3558 the previous week, -2.7% YoY

Japanese Yen At 41-week Low

The Japanese Yen depreciated to 146.45 per dollar, reaching its most vulnerable level since November 2022, as investors flocked to the dollar following Federal Reserve Chair Jerome Powell’s announcement of the US central bank’s readiness to employ additional rate hikes in response to inflation. Simultaneously, Powell conveyed a note of caution, indicating that policymakers would exercise prudence in deciding whether to proceed with more rate hikes or maintain stability. The currency’s depreciation was also influenced by the expansion of yield differentials, driven by the anticipation that the Bank of Japan would uphold its ultra-easy monetary policy throughout 2024, despite the broader trend of heightened global policy tightening. In a separate context, it’s notable that BOJ Governor Kazuo Ueda recently engaged in discussions with Prime Minister Fumio Kishida regarding economic developments.

Euro Remains at 2-Month Low

The Euro remained below the $1.08 mark, lingering around its weakest level since mid-June, after Fed Chair Jerome Powell indicated a readiness to implement further rate hikes if necessary to address inflation, while also conveying prudence regarding the bank’s future actions. Simultaneously, weak economic data from Europe has intensified expectations that the ECB might imminently pause its rate hikes. In August, German business morale experienced a fourth consecutive weakening, leading to its lowest point in a span of 10 months. Additionally, confirmation emerged that Europe’s largest economy, as indicated by GDP, encountered a stall in the second quarter following a recession in the winter months.

Commodity prices had quite a divergent week as Energy fell, Metals rose and Grains ended mixed.

The broad-based Bloomberg Commodity Index closed higher at 105.48, up +1.2% from 104.24 in Week 33, 2023. Year-to-date, the index is down -6.5%.

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. 

WTI Futures Hit $80 pb

Crude oil futures were higher for the week as US diesel prices soared after the number of oil rigs dropped and a fire broke out at a refinery in Louisiana. Meanwhile, the greenback strengthened to an 11-week high after Powell’s speech at Jackson Hole summit, who emphasized the US Federal Reserve’s commitment to bringing inflation back to 2%. On the supply side, supply cuts from OPEC+ continue to support the market as Saudi Arabia and Russia said they would extend their additional cuts into September. Rising prices of a Russian crude sold to China should peak soon, with more independent refiners likely to switch to cheaper oil from Iran which ramped up exports to 4-1/2 year highs in August, several trade sources said. Iran’s oil minister said the country’s oil output will reach 3.4 million barrels per day by the end of September despite US sanctions. 

WTI crude futures settled at $79.83 per barrel on Friday, while Brent futures settled at $83.95 per barrel.

The settlement price spread between WTI and Brent increased by +$0.57 to $4.12 from $3.55 the previous week on Friday 18 August 2023.

Baker Hughes total total U.S. rig count -10 at 632 (Prior: -12).

• WTI settled lower at $79.83/barrel from $81.25 the previous week (-0.6% YTD)
• Brent settled lower at $83.95/barrel from $84.80 the previous week (-2.0% YTD)
• Nat Gas settled lower at $2.54/MMBtu from $2.55 the previous week (-37.5% YTD)

Gold Gains 1.3% For The Week

Gold dropped below $1,910 an ounce on Friday but bounced back to settle at $1,939.90 per ounce, having faced pressure from a strong dollar as investors continued to gauge the monetary policy outlook following Federal Reserve Chair Jerome Powell’s Jackson Hole remarks. The banker noted caution is required in next meetings to assess the health of the economy, but further hikes won’t be ruled out since the regulator aims to bring inflation back to the 2% target. At the same time, traders bet on a possible pause in tightening from the ECB due to the weak European data. More insights on that could be provided in Lagarde’s comments later in the day. Previously, two Fed officials indicated that the jump in bond yields could complement the central bank’s effort to slow the economy and reign in price pressures without needing to raise rates. Weekly, the metal gained 1.3% after four consecutive periods of declines.

Corn Prices Hold Around 4-Year Lows

Corn futures dipped to $4.88 per bushel, nearly returning to the 4-year bottom touched on August 15th, pressured by promising early crop tour results and increased rating for U.S. corn. On the other hand, sweltering temperatures and lack of rain in the U.S. Midwest provided support for the commodity. U.S. government predicts that dry conditions at the start the growing season would mean smaller harvests this fall. Still, the corn crop would be the second biggest on record due to large acreage and improved growing conditions during the key development month of July. The U.S. is projected to be the No. 2 exporter of soy and corn, after Brazil, this year.

Wheat Prices Resume Falling

Wheat futures in the US fell to $6.22 per bushel, retreating from $6.39 last week, after Ukraine’s five neighbours agreed on extending a ban on Ukrainian grain imports by the end of the year, lowering demands of Ukrainian wheat. The ban imposed in May by the European Union allowing Poland, Bulgaria, Hungary, Romania and Slovakia to ban domestic sales of Ukrainian wheat, maize, rapeseed and sunflower seeds, is set to end on September 15. In addition, a two-month low for the euro against the dollar helped counter pressure from a sharper fall in wheat.

• Corn settled lower at $4.88/bushel, from $4.93 the previous week (-28.2% YTD)
• Wheat settled lower at $6.22/bushel, from $6.39 the previous week (-21.6% YTD)
• Soyabeans settled higher at $13.88/bushel, from $13.53 the previous week (-9.0% YTD)

Palm Oil Futures Book 2nd Straight Gains Weekly

Malaysian palm oil futures settled above MYR 3,950 per tonne, rising for the second day while trying to extend gains from the prior week, amid higher prices of related edible oils. Also, China reportedly buys palm oil in physical markets for September and October shipments. Meantime, export of Malaysian palm oil products for August 1-25 fell 7.8% to 974,235 tons from 1,056,830 tons during July 1-25, according to cargo surveyor Intertek Testing Services. Meanwhile, India’s palm oil imports in July jumped 59% from the previous month to 1.08 million tons, the highest in seven months. In Indonesia, data from an industry association showed that palm oil exports from the world’s top producer, including refined products in June, stood at 3.45 million tons, while stock by the end of the month was at 3.69 million tons. 

Baltic Exchange Dry Index Falls for 6th Day, Posts Weekly Loss

The Baltic Exchange’s dry bulk sea freight index, which measures the cost of shipping goods worldwide, fell for a sixth straight session on Friday, down 2.7% to a near one-month low of 1,080 points, pressured by the larger vessel segments. The capesize index, which tracks vessels typically transporting 150,000-tonne cargoes such as iron ore and coal, declined for a sixth day, slipping 6.8% to 1,174 points; and the panamax index, which tracks ships that usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, fell 7 points to 1,449 points. Conversely, the supramax index added 2 points at 908 points. The benchmark index dropped 12.7% for the week, its biggest weekly decline since June 2nd. 

• • • • •

Asian Markets Mostly Decline

Markets in the Asia-Pacific fell across the board as investors prepared for signals on U.S. monetary policy from central bankers’ comments at the Jackson Hole meeting on Friday, including a speech by U.S. Federal Reserve chair Jerome Powell. Japan’s Nikkei 225 tumbled 2.05%, leading losses in Asia and closing at 31,624.28. The Topix was down 0.88%, ending at 2,266.4. Both indexes snapped four-day winning streaks. In Australia, the S&P/ASX 200 also lost 0.93%, ending at 7,115.2. South Korea’s Kospi fell 0.73%, finishing at 2,519.14 and the Kosdaq was lower by 0.26%, closing at 899.38. Hong Kong’s Hang Seng index was down 1.28% in its final hour, while mainland Chinese markets saw a smaller loss, with the CSI 300 slipping 0.38% and ending at 3,709.15.

The Japanese stock markets dropped 2.05% to close at 31,624 while the broader Topix Index lost 0.88% to 2,266 on Friday, snapping a four-day advance and tracking losses on Wall Street overnight as investors turned cautious ahead of Federal Reserve Chair Jerome Powell’s Jackson Hole speech. Strong quarterly numbers from Nvidia which initially pushed the market higher also failed to sustain the recent run-up in stocks. Meanwhile, investors digested data showing the core inflation rate in Japan’s capital city of Tokyo slowed to 2.8% in August from 3% in July, but remained above the Bank of Japan’s 2% target for the 15th consecutive month. Technology stocks led the selloff, with sharp losses.

Hong Kong’s Hang Seng index slumped 255.79 points or 1.40% to close at 17,956.38 on Friday, snapping three-day gains while heading back to near its lowest level in nine months hit earlier in the week, as news that Beijing would ease mortgage rules was unable to lift sentiment. Simultaneously, traders were increasingly uneasy ahead of the annual gathering of top central bankers in Jackson Hole, Wyoming, later today where higher-for-longer interest rate talk may dominate the event. Locally, exports and imports in Hong Kong continued their downward momentum in July amid weak demand from abroad and at home. The tech sector sank over 2% following a plunge on the Nasdaq Thursday as the Nvidia rally was short-lived, while other sectors also fell. Meituan sank 5.6% after flagging headwinds for its core business in the coming quarter. For the week, the index was almost unchanged.

The Shanghai Composite fell 0.59% to close at 3,064 while the Shenzhen Component dropped 1.23% to 10,130 on Friday, hitting their lowest levels in at least eight months and tracking losses on Wall Street overnight as investors turned cautious ahead of Federal Reserve Chair Jerome Powell’s Jackson Hole speech. Strong quarterly numbers from Nvidia which initially pushed the market higher also failed to sustain the recent run-up in stocks. Technology stocks led the decline.

The S&P/ASX 200 Index fell 0.93% to close at 7,115 on Friday, erasing gains from the past three sessions, with nearly all sectors participating in the decline. Australian shares tracked losses on Wall Street overnight as investors turned cautious ahead of Federal Reserve Chair Jerome Powell’s Jackson Hole speech. Strong quarterly numbers from Nvidia which initially pushed the market higher also failed to sustain the recent run-up in stocks. Technology stocks led the decline, with sharp losses.

Singapore stocks buck regional trends to
end week higher; STI up 0.3% on Friday

Singapore stocks bucked regional market trends and rose on Friday (Aug 25) to close out the week higher. The gains come amid slowing growth in the Republic’s second-quarter service receipts and yet another fall in monthly factory output. 

The Straits Times Index (STI) climbed 0.3 per cent or 9.16 points to end the week at 3,189.88. Across the broader market, gainers edged out losers 246 to 243, with 1.6 billion securities worth S$836.5 million changing hands.

Singapore reported two sets of macroeconomic data on Friday. Service industries recorded a 3.9 per cent on-year rise in business receipts in Q2, down from the revised 7.7 per cent growth in the preceding quarter. Meanwhile, the country’s factory output fell for the 10th straight month in July, slipping 0.9 per cent. However, that was less than the revised 6.6 per cent decline in June.

Bursa ends flat amid regional retreat ahead of Fed chair’s speech

• Japan’s Nikkei: -2.1% (+0.6% for the week) +21.2% YTD
• Hong Kong’s Hang Seng: -1.4% (UNCH for the week) -9.2% YTD
• China’s Shanghai Composite: -0.6% (-2.2% for the week) -0.8% YTD
• India’s Sensex: -0.6% (-0.1% for the week) +6.7% YTD
• South Korea’s Kospi: -0.7% (+0.6% for the week) +12.6% YTD
• Australia’s ASX All Ordinaries: -0.9% (-0.5% for the week) +1.5% YTD 
• Malaysia’s FKLCI: -0.0% (-0.1% for the week) -3.4% YTD
• Singapore’s STI: +0.3% (+0.5% for the week) -1.9% YTD

European Markets Slightly Down After Powell Remarks

European equity markets closed Friday’s session mostly at breakeven having pared almost all of its early gains, prompted by Federal Reserve Chair Jerome Powell’s indication of preparedness to implement further interest rate hikes to counteract inflation. However, Powell also emphasized that the central bank would adopt a cautious approach in upcoming meetings. Additionally, ECB President Christine Lagarde’s upcoming remarks, set to occur after the close of the European market, are anticipated to offer insights into the future trajectory of ECB interest rates. Shifting focus to economic data, it was confirmed that the German economy stagnated in the second quarter, following a winter recession. German business morale deteriorated further in August for the fourth month in a row, reaching the lowest level since last October. 

Both Frankfurt’s DAX 40 and the pan-Europan Stoxx 600 inched 0.1% lower on Friday. Looking at the week as a whole, the DAX gained 0.2% and the STOXX 600 added about 0.6%.

UK Shares Pare Gains

Equities in London pared small gains to close at the flatline at 7,339 on Friday, tracking the downturn in worldwide equities after Fed Chairman Powell’s speech at the Jackson Hole symposium reignited bets that the central bank will remain hawkish. Powell underscored the Fed’s priority to bring inflation down to 2%, noting that an extended period of strong growth could warrant another rate hike. Hawkish pressure was also present domestically, as new data from GfK showed that British consumer confidence improved more than expected in August, with the financial situation gauge approaching the positive territory and pointing to some optimism for UK consumers. Heavy-weighing miners erased early gains and traded in the red, with Glencore and Rio Tinto dropping 0.5%, while Anglo American sank 1%. On the other hand, energy producers edged higher, with BP and Shell remaining in the green. On the week, the FTSE 100 closed 1.1% higher.

• U.K.’s FTSE 100: +0.1% (+1.1% for the week) -1.5% YTD
• Germany’s DAX: +0.1% (+0.4% for the week) +12.3% YTD   
• France’s CAC 40: +0.2% (+0.9% for the week) +11.7% YTD
• Italy’s FTSE MIB: +0.5% (+1.6% for the week) +19.0% YTD
• Spain’s IBEX 35: +0.2% (+0.8% for the week) +13.5% YTD
• STOXX Europe 600: -0.0% (+0.7% for the week) +6.2% YTD

• • • • •

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

• Week 35 (28 August to 01 September) has the most bullish session (Tue 29) of the year but is otherwise quite volatile.
• Tuesday 29 August is the most bullish session of the year.
• The third-to-last trading day (Tuesday 29) has been up on SPX 19 years in a row between 2003 and 2021 (last year down).
• The second-last trading day (Wednesday 30) has been down on SPX 17 of the last 26 (last year down).
• The last trading day in August has been up on SPX 9 of the last 14 (last year down). 
• The first trading day of September has been down on SPX 9 of the last 14.

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

• Week 35 (28 August to 01 September) starts bearish, gets extremely bullish midweek and ends bearish.

Week 35 Key U.S. Economic Notes:

• Monday 28 August – Nothing of note
• Tuesday 29 August – FHFA Housing Price Index, S&P Case-Shiller Home Price Index, Consumer Confidence, JOLTS – Job Openings
• Wednesday 30 August – MBA Mortgage Applications Index, ADP Employment Change, Adv. Intl. Trade in Goods, GDP – Second Estimate, GDP Deflator – Second Estimate, Pending Home Sales, EIA Crude Oil Inventories
• Thursday 31 August – Initial Claims, Continuing Claims, Chicago PMI, PCE Prices, Core PCE Prices, Personal Income, Personal Spending, Natural Gas Inventories
• Friday 01 September – Average Workweek, Hourly Earnings, Non-Farm Payrolls, Non-Farm Private Payrolls, Unemployment Rate, Construction Spending, ISM Manufacturing Index

U.S. Economic Releases for Week 35

Monday 28 August

• No economic data of note
• $45 bln 2-yr Treasury note auction results at 11:30 ET
• $46 bln 5-yr Treasury note auction results at 13:00 ET

Tuesday 29 August

• June FHFA Housing Price Index (prior 0.7%) at 9:00 ET
• June S&P Case-Shiller Home Price Index (prior -1.7%) at 9:00 ET
• July job openings (prior 9.824 mln) at 10:00 ET
• August Consumer Confidence (prior 117.0) at 10:00 ET
• $36 bln 7-yr Treasury note auction results at 13:00 ET

Wednesday 30 August

• Weekly MBA Mortgage Index (prior -4.2%) at 7:00 ET
• August ADP Employment Change (prior 324,000) at 8:15 ET
• Q2 GDP – second estimate (prior 2.4%) at 8:30 ET
• Q2 GDP Deflator – second estimate (prior 2.2%) at 8:30 ET
• July advance goods trade balance (prior -$87.8 bln) at 8:30 ET
• Advance Retail Inventories (prior 0.3%) at 8:30 ET
• Advance Wholesale Inventories (prior -0.5%) at 8:30 ET
• July Pending Home Sales (prior 0.3%) at 10:00 ET
• Weekly crude oil inventories (prior -6.14 mln) at 10:30 ET

Thursday 31 August

• Weekly Initial Claims (prior 230,000) at 8:30 ET
• Continuing Claims (prior 1.702 mln) at 8:30 ET
• July Personal Income (prior 0.3%) at 8:30 ET
• Personal Spending (prior 0.5%) at 8:30 ET
• PCE Prices (prior 0.2%) at 8:30 ET
• Core PCE Prices (prior 0.2%) at 8:30 ET
• August Chicago PMI (prior 42.8) at 9:45 ET
• Weekly natural gas inventories (prior +18 bcf) at 10:30 ET

Friday 01 September

• August Non-farm Payrolls (prior 187,000) at 8:30 ET
• Non-farm Private Payrolls (prior 172,000) at 8:30 ET
• Unemployment Rate (prior 3.5%) at 8:30 ET
• Average Hourly Earnings (prior 0.4%) at 8:30 ET
• Average Workweek (prior 34.3) at 8:30 ET
• Final August S&P Global U.S. Manufacturing PMI (prior 47.0) at 9:45 ET
• July Construction Spending (prior 0.5%) at 10:00 ET
• August ISM Manufacturing Index (prior 46.4%) at 10:00 ET

International Economic Releases for Week 35

Sunday 27 August

• ALL – Jackson Hole Symposium
• Japan – BOJ Gov Ueda Speaks
• UK – MPC Member Broadbent Speaks,

Monday 28 August

• Australia – Retail Sales m/m
• EU –
  • Eurozone M3 Money Supply y/y, Private Loans y/y
  • German Buba President Nagel Speaks
• UK  – BRC Shop Price Index y/y

Tuesday 29 August

• Australia – RBA Gov-Designate Bullock Speaks
• Japan – Unemployment Rate
• EU –
  • German GfK Consumer Climate
  • EU Economic Forecasts

Wednesday 30 August

• Australia – CPI y/y, Building Approvals m/m, Construction Work Done q/q
• Japan – Consumer Confidence
• UK – M4 Money Supply m/m, Mortgage Approvals, Net Lending to Individuals m/m
• EU –
  • German Import Prices m/m, Prelim CPI m/m
  • Spanish Flash CPI y/y

Thursday 31 August

• Malaysia – Market Closed in observance of Merdeka Day 🇲🇾
• Australia – Private Capital Expenditure q/q, Private Sector Credit m/m
• China – Manufacturing PMI, Non-Manufacturing PMI
• Japan – Prelim Industrial Production m/m, Retail Sales y/y, Housing Starts y/y
• UK – MPC Member Pill Speaks
• EU –
  • Eurozone CPI Flash Estimate y/y, Core CPI Flash Estimate y/y, Unemployment Rate, ECB Monetary Policy Meeting Accounts
  • German Retail Sales m/m, Unemployment Change
  • French Consumer Spending m/m, Prelim CPI m/m, Prelim GDP q/q
  • Italian Monthly Unemployment Rate, Prelim CPI m/m

Friday 01 September

• Australia – Commodity Prices y/y
• Japan – Capital Spending q/y, Final Manufacturing PMI
• China – Caixin Manufacturing PMI
• UK – Nationwide HPI m/m, Final Manufacturing PMI
• EU –
  • Eurozone Final Manufacturing PMI
  • German Final Manufacturing PMI
  • French Final Manufacturing PMI, Gov Budget Balance
  • Spanish Manufacturing PMI
  • Italian Manufacturing PMI

Monday 28 August

• BMO:  BZUN
• AMC: HEI

Tuesday 29 August

• BMO: AMWD BMO BNS BBY BIG CTLT DCI SJM MBUU NIO PDD
• AMC: AMBA BOX HPE HPQ NCNO PVH ZTO

Wednesday 30 August

• BMO: BF.B CONN MCFT PDCO
• AMC: CHWY COO CRWD FIVE GEF OKTA CRM VEEV VSCO PSTG

Thursday 31 August

• BMO: FLWS ASO CAL CPB CM CIEN DG GCO GMS MOMO HRL BEKE OLLI SIG TITN UBS
• AMC: AVGO DELL ESTC HCP LULU MDB NTNX OXM PD S VMW

Friday 01 September

• Nothing of note 

Monday 28 August 2023

The Stock Trader’s Almanac’s stats for the Benchmark Indices for Monday of Week 35 over a 21-year average are;

• Dow Jones (DJIA): Bearish 57.1% 
• S&P 500 (SPX): Mildly Bullish 52.4%
• NASDAQ (COMP): Mildly Bullish 52.4% 

The Pattern Trader™ Tools Screener stats for the Benchmark Index ETFs for Monday of Week 35;

• SPDR DJIA ETF Trust (DIA – 19yr Avg): Bearish 57.89% 
• SPDR S&P 500 ETF Trust (SPY – 19yr Avg): Bullish 57.86%
• Invesco QQQ Trust Series I (QQQ – 13yr Avg): Extremely Bullish 76.92%

Sunday 27 August

• ALL – Jackson Hole Symposium
• Japan – BOJ Gov Ueda Speaks
• UK – MPC Member Broadbent Speaks,

Monday 28 August

• Australia – Retail Sales m/m
• EU –
  • Eurozone M3 Money Supply y/y, Private Loans y/y
  • German Buba President Nagel Speaks
• UK  – BRC Shop Price Index y/y
• US – 
  • No economic data of note
  • $45 bln 2-yr Treasury note auction results at 11:30 ET
  • $46 bln 5-yr Treasury note auction results at 13:00 ET

• • • • •

Friday 25 August 2023, AMC

From last weekend’s WMO;

“The momentum is still with the bears as of Friday’s close but the way down in the coming week will be limited. SPX could find good support at 4,330, COMP has its good support at 13,150 and DJIA’s support should be at 34,350. So, technically speaking, the market should stall out and consolidate in Week 34.“

Should SPX come back down in the coming week and find support at 4,330 again, we might just get a Double Bottom. However, a break below would make a nice downside PhiB with a target of around 4,170 over the next two or three weeks. Histograms are suggesting that the bearish momentum is fading. For the bullish histograms to appear, SPX will have to first break above its 50DSMA (where the SPX and COMP were rejected on Thursday 24 August).

The DJIA may just find support at 34,045 (Phib COP) in this newly drawn upside PhiB along its 61.8% retracement level. Bearish histograms are still suggesting some residual bearish momentum that is receding but not yet ready to turn green.  Overall volumes have also been receding to suggest that the bearish interest may be fading already.

Sector & Industry ETFs Summary

Week 34 was a mixed week all round.

• Technology, Homebuilders and Discretionary remain the best gainers YTD for a twenty-second straight week.
• Technology is still by far the stand-out winner YTD.
• Energy is the only defensive sector with a YTD Gain for a second straight week.
• Technology and Discretionary were the best weekly gainers.
• Retail and Energy were the worst losers this week.
• Utilities remains the worst loser YTD for a fourth week while Telecommunication and Staples are a distant third and second worst YTD losers.

Shiller PE Ratio

The Shiller PE Ratio, as of Friday 25 August, is at 30.39, +0.8% higher than 30.14 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.

25 August 2023 AMC

Last weekend;

“Week 33 was S&P 500’s and Nasdaq Composite’s third week down with more than 2% losses with the bears firmly in control over proceeding until Friday’s stalemate from short-covering.”

The bears still have the numbers while the bulls still seem to lack any real conviction yet. Wednesday, Thursday and Friday was a tug-of-war amongst the broader market internals as the market swung both ways. The coming week might see more of the same as investors prepare to enter the most bearish month of the year – September.

“The one-month average has now swung in the bears’ favour especially having cut through some critical and psychological price and technical levels in Week 33.“

The bears, as mentioned earlier, may still have the numbers but the bulls have picked their own numbers up but it hasn’t been enough to overrun the bears yet.

Last weekend;

“Average and daily volumes ticked up on Friday as it was Expiration Day for stock options. Regardless, volumes held across both exchanges in a week when the market sold off.“

Average volumes on NASDAQ continue to wane as the flavour of mega-cap tech starts to get bland. NYSE’s volumes have been ticking up in the last few days to suggest that investors might be looking elsewhere to park their funds, especially amongst the big and mega caps not related to tech. 

The CBOE Volatility Index (VIX), often referred to as Wall Street’s “fear gauge,” closed Week 33 at 15.68, -9.4% lower than the previous week’s close at 17.30.

• 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 edged down to 1.11 from 1.12 the previous week.
• Index Put/Call Ratios fell to 1.16 from 1.38 the previous week.
• ETF Put/Call Ratios dipped to 1.20 from 1.25 from a week ago.
• Equity Put/Call Ratios rose to 0.97 from 0.76 the previous week.
• The CBOE VIX Put/Call Ratio capitulated to 0.25 from 0.77 last week.

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

Consumer Related Issues Are The Next Issue

Last week’s WMO;

“As long as industrials, financials, homebuilders and materials fail to take some meaningful and sustainable leadership in this market, any talk of an economic recovery has to be taken with a huge spoon of salt. Till then, volatility will continue to haunt this market up and down.“

Adding to the absence of leadership from the growth sectors like industrials, financials, homebuilders and materials, consumer related issues are likely to be the next concern for investors. This week’s bout of earnings – most of which were retail and consumer related – from the likes of Macy’s (M), Foot Locker (FL), Dollar Tree Stores (DLTR), Petco Health & Wellness (WOOF), Gap, Inc. (GPS), and Nordstrom (JWN), were suggesting that low to middle-income consumers were spending less as a result of inflation, higher interest rates, resumption of federal student loan payments in October, and an apparent slowdown in excess savings that forcing monies out of discretionary spending (growth sector) into consumables (defensive sector).

And we haven’t even touched on debt repayments – that’s another whole different level that puts more woes on consumer related issues. The Financial Obligations Ratio, which is the ratio of total required household debt payments to total disposable income, has been rising since the stimulus-driven lows in 2021. Although not an immediate concern that will rock the mark yesterday, this will become another economic stress point in the coming months.

Portfolio Dumping Coming

From last weekend’s WMO

“… I’m betting that the (bull’s) buying will be on lower volumes and without major conviction especially considering that the smart money tends to bail out of stocks towards the end of August and even dump stocks in September especially when a bubble has formed.“

This past week (34) may have the that shot across the bow as buying was indeed on lower volumes while selling volumes again ticked up. 

“I’m keeping the bear in place, at least for the start of next week, after which, I am going to reassess the situation going into the final two weeks of August – a period I suspect is likely to see some major selling – and prepare for the worst.“

I’ll be expecting more of the same in the coming Week 35. The bulls will have their turn as will the bears. The winner of that bout as we go into September will be the one that dominates the broader market (not just the mega caps) and how volumes perform depending on which direction the market moves. 

The prospect of fund managers dumping portions of their struggling portfolios in September is more likely than not. That spectre will be haunting investors as they consider their positions that have been falling over the last four weeks. So be prepared for anything … especially the worst.

Happy Hunting!

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