Market News

Wall Street’s Projections After August’s Market Challenges

/ August 31, 2023

The year 2023 began with a remarkable 21% surge in the S&P 500 during the initial seven months. However, the momentum was abruptly halted by the August downturn. Historical trends indicate that both August and September historically pose challenges for stock markets, with macroeconomic hurdles still in the picture. ? Market Analysis Let’s delve into the sagacity shared by the most esteemed Wall Street minds, as they analyze the market’s direction amidst the August setback. ? JPMorgan’s Interpretation: Dubravko Lakos, the Chief Global Stock Strategist, holds the belief that the 2023 market rally has come to an end. The Federal Reserve’s unwavering stance and a robust economy might restrict short-term growth, leading to an eventual “hard landing.” ? Insights from Morgan Stanley: CIO Mike Wilson underscores Nvidia’s rally-turned-reversal as a signal to moderate stock expectations. The broader rally without substantial foundations appears unsustainable, potentially influenced by the Federal Reserve’s policy decisions. ? Fundstrat’s Projection: Tom Lee envisions a revival in September. Anticipating a month-long resurgence, driven by a cooling economy, a stable Federal Reserve stance, and overly pessimistic sentiment, Lee suggests a potential S&P 500 rebound to its 2023 peak. ? Wedbush’s Diagnosis: Dan Ives anticipates an AI-powered tech rally, despite challenges posed by the persistent 10-year stubbornness and Federal Reserve actions. He’s convinced that the surge in AI-driven growth will invigorate the tech sector. ? Siegel’s Analysis: Jeremy Siegel proposes a potential 9% upswing for the S&P 500 from its current levels. This could materialize if Jerome Powell acknowledges waning inflation and the Federal Reserve avoids further interest rate hikes. ? Rosenberg’s Caution: David Rosenberg predicts a market tumble due to economic pressures, including dwindling bond prices and surging yields. A second phase of equity market downturn seems imminent, driven by a labor market impasse. ? Key Advisors Wealth Management’s Vigilance: Eddie Ghabour, the CEO of Key Advisors Wealth Management, raises a cautionary flag, warning of a potential 10% or more decline in stocks following another rate hike. He emphasizes the influence of credit card debt and the resumption of student loan payments. ? Wrapping Up As expert opinions vary, the looming uncertainty is palpable. External factors, encompassing inflation, Federal Reserve policies, and global economic dynamics, are poised to steer the market’s course. Remember, the investment realm is fraught with risks, necessitating prudent decision-making. How do you interpret these insights? Share your thoughts below! ??

Market News

Treasury Yields Gain Traction, Impacting U.S. Stock-Futures Rally Momentum

/ August 30, 2023

Early on Wednesday, U.S. stock index futures experienced a slight softening as the ongoing rally took a brief pause, coinciding with a minor uptick in Treasury yields. Here’s a snapshot of the current status of stock-index futures: In the preceding session, the market performed as follows: Market Dynamics: The U.S. bond market’s sway on stocks remains firm. A slight rise in Treasury yields (BX:TMUBMUSD10Y) in the early hours has led to pressure on equity index futures, following Tuesday’s impressive rally. The S&P 500 index reached a peak not seen in three weeks in the prior session. This came in response to a marked decline in Treasury yields, prompted by signals of labor market softness and waning consumer confidence. Over the past three trading days, the benchmark equities index has gained a solid 2.2%, rebounding above its 50-day moving average. This coincides with a drop of nearly 15 basis points in the 10-year Treasury yield during the same timeframe. In recent times, equities tend to flourish when implied borrowing costs decrease. Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, noted, “Yesterday marked a classic ‘bad news is good news’ scenario,” attributing the boost in market sentiment to unexpected reductions in U.S. job openings and consumer confidence. She emphasized that these developments have shifted expectations regarding future rate hikes by the Federal Reserve. Upcoming Data Points: Investors are eagerly awaiting the release of the ADP report on private sector employment for August, slated for 8:15 a.m. Eastern. This report is poised to either validate or challenge the prevailing market narrative. Additionally, the July PCE inflation index and the August nonfarm payrolls report are scheduled for publication on Thursday and Friday, respectively. On the agenda for Wednesday are other significant economic updates, including revisions of second-quarter GDP, advanced readings of trade balances in goods, and data on retail and wholesale inventories for July. Additionally, pending home sales data for July will be disclosed at 10 a.m. Eastern. Corporate Spotlight: Today, all eyes are on the earnings outcome of Salesforce (CRM, +0.11%), set to be unveiled after the closing bell. Meanwhile, PC manufacturer HP (HPQ, +0.13%) adopted a cautious stance in its outlook on Tuesday, causing a 9% decline in premarket trade. HP’s CEO, Enrique Lores, highlighted challenges in the PC and printer market while hinting at the potential of AI products to stimulate sales in the future.

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Deciphering Price Action: Mastering the ABC Method for Traders

/ August 29, 2023

Welcome to our latest blog post, where we’re about to unravel the secrets of price action trading. Whether you’re a NinjaTrader aficionado, a TradeStation enthusiast, or a TradingView devotee, the principles we’re about to discuss apply universally. Today, we’re delving into the ABC method—a technique that demystifies price action, making it accessible and effective for traders of all levels. So, let’s embark on this educational journey and learn how to crack the price action code. Unveiling the ABC Method We’re here to empower you with knowledge that goes beyond mere trading signals. It’s crucial to comprehend the mechanics behind the tools you use. Our focus will be on understanding the ABC software and the Trade Scalper, and more importantly, how they function in real trading scenarios. Step 1: Establishing Ground with ATR: At the core of assessing market volatility is the Average True Range (ATR) indicator. ATR serves as your compass, guiding you toward the most appropriate timeframes for your trading strategy. In the context of a five-minute chart, ATR with a setting of four is generally effective. It adapts to market conditions, helping you identify the optimal timeframe to navigate price action. Step 2: Deconstructing the Trading Day into A, B, and C: Let’s deconstruct the trading day into three distinctive phases: A, B, and C. Each segment mirrors the varying market dynamics that unfold over the course of a trading session. Applying the ABC Method: Now that we’ve dissected the components, let’s put them into action. Armed with insights from ATR and an understanding of the three market segments, you can tailor your trading strategy to align with the market’s current state. In high volatility (Segment A), opt for shorter timeframes for quick scalping. During transitions (Segment B), leverage slightly longer timeframes to ride established trends. As the day winds down (Segment C), evaluate potential last-minute moves. Conclusion: Equipped to Decode Price Action This isn’t just another trading lesson; it’s a key to unlocking the mysteries of price action. By grasping the ABC method, you gain the ability to navigate the market’s ever-changing rhythms. Trading is a blend of art and science, and with the ABCs—ATR, Breakdown, and Context—in your toolkit, you’re positioned to make well-informed decisions. So, the next time you’re deciphering a chart, remember the ABCs you’ve learned here. Armed with this knowledge, you’re ready to take on the intricate world of price action trading with confidence. Happy trading, and may the ABCs lead you to success!

Market News

? S&P 500’s August Struggle: No Surprise for Investors

/ August 29, 2023

The disappointment of August for stock investors shouldn’t catch anyone off guard. With a history of being the second-worst month for the S&P 500 over the last 35 years, August’s lackluster performance is no anomaly. And September hasn’t always been smooth sailing either. After the tumultuous ride of 2022, some investors are playing it safe, cashing out to safeguard their gains. But don’t lose hope! Our featured perspective today comes from Seth Golden, Chief Market Strategist at Finom Group. He’s here to remind us that the end of the S&P 500’s five-month winning streak doesn’t necessarily spell disaster. Why trust Golden’s insights? Back in February, he accurately predicted the S&P 500 hitting the 4,350 mark by the end of the year, a prediction that came true in June. Brushing aside concerns of a recession, he advised investors to seize opportunities in large growth stocks. And those picks, Amazon (AMZN) and Visa (V), have paid off. Delving into the present, Golden looks at data from Ryan Detrick of Carson Investment Research. Detrick’s study of five-month winning streaks for the S&P 500 since 1950 reveals that 79% of the time, these streaks extend to six months. While this isn’t the current scenario, Golden draws optimism from this data—historically, after five months of gains, the S&P 500’s performance in the six- and twelve-month periods that follow has been positive 82% and 93% of the time, respectively. “The average S&P 500 returns 6 and 12 months later are also 6%+ and 12%+. Savvy market participants may find solace in the evolving price action,” the strategist points out. Further reasons not to jump ship just yet? Golden highlights the confirmation of the bull market on 6/8/23, when the S&P 500 surged 20% from its bear market low. Achieving this shift took 165 days, the second-longest bear-to-bull transition since 1952. Golden concludes, “All but one of these previous bear-to-bull markets outlasted and outperformed the current 9-month cycle. It’s unlikely that a new bear market starts at the 9-month mark without delivering further gains in the 12-month forward period.”

Market News

Stormy Forecast: U.S. Stock Market Braces for an Uncertain Week

/ August 28, 2023

The U.S. stock market had an eventful week, breaking its streak of three consecutive losses amid a backdrop of volatility. The period was characterized by significant developments, including Nvidia’s earnings announcement and the much-anticipated speech by Federal Reserve Chief Jerome Powell at the annual Jackson Hole symposium in Wyoming. However, the coming week presents another set of challenges for investors as they await key economic indicators. These indicators include the Federal Reserve’s preferred inflation gauge and the latest monthly employment report, both of which could determine the market’s direction in the midst of uncertain economic prospects. Powell’s address signaled the central bank’s willingness to further raise interest rates. Yet, he acknowledged the uncertainty surrounding the necessity of more rate hikes. This uncertainty arises from the residual effects of the tightening monetary policies over the past year and a half, adding complexity to the decision-making process. Analysts have drawn parallels between Powell’s situation and a mountaineer pausing for breath on a treacherous ascent. The Federal Open Market Committee is grappling with whether they’ve reached the pinnacle of their efforts to manage inflation or if there are more challenges to overcome. Nvidia’s impressive earnings, driven by substantial generative AI revenue, were significant highlights. However, both Nvidia’s results and Powell’s speech aligned with expectations, evoking relatively subdued responses from the usually animated August Wall Street. Despite the mixed week, the U.S. stock market concluded with gains. The Dow Jones Industrial Average dipped 0.5%, while the S&P 500 advanced by 0.8%, and the Nasdaq Composite surged 2.3% over the week. Looking ahead, with the Q2 earnings season winding down, attention shifts to upcoming economic data that could provide insights into the U.S. economy’s resilience. Investors are also closely monitoring the Federal Reserve’s policy meeting scheduled for September 19-20, seeking indications of potential future interest rate adjustments. This week’s reports on the job market, including the July Job Openings and Labor Turnover Survey (JOLTS) and the August ADP National Employment Report, will be pivotal. The Labor Department’s August nonfarm-payrolls report, to be released on Friday, holds immense significance. In a market navigating uncertain terrain, the elusive “Goldilocks scenario” of steady but not stagnant economic growth is the goal. Any economic data exceeding expectations could prompt cautious market reactions. The core Personal Consumption Expenditures (PCE) Index assumes paramount importance, aligning with Powell’s emphasis. While recent lower core inflation readings were encouraging, building unwavering confidence in sustained downward inflation trends demands a more extended period of data. In summation, the U.S. stock market endured a dynamic week, leaving investors alert and responsive. The forthcoming reports and indicators will shape the market’s trajectory, as observers seek signs of stability or potential shifts amid the ongoing uncertainty.

Market News

Bulls Beware: Why the S&P 500’s Support Break Could Spell Trouble

/ August 27, 2023

The S&P 500 Index (SPX) reached a peak near 4600 in late July, marking the start of a downtrend that persists. Recently, it faced a significant test of support around 4330, and this support held firmly. According to this measure, the bull market remains intact on the SPX chart. While there is another support level at 4200, it’s the 4330 level that is crucial for maintaining a “core” bullish stance. Despite several instances of oversold conditions, the ongoing rally could be categorized as an oversold bounce. Typically, such rallies tend to reach or slightly surpass the declining 20-day Moving Average before fading. With NVIDIA’s robust earnings reported on Wednesday, SPX is likely to surpass its declining 20-day Moving Average on Thursday. During the recent pullback, SPX dipped below its -4σ “modified Bollinger Band” (mBB), which completed the McMillan Volatility Band (MVB) sell signal from late July (indicated by a red “S” on the SPX chart). Furthermore, moving below the -4σ Band may set the stage for a potential new MVB buy signal. Although a “classic” mBB buy signal appeared recently in SPX’s activity, these signals have often produced false alarms in the past. Therefore, confirmation through follow-through, culminating in the MVB buy signal, is awaited and could materialize shortly. Equity-only put-call ratios continue to climb, maintaining their sell signals until they reverse and start descending. Interestingly, even during market rallies, significant put buying persists, contributing to the elevation of these ratios. Throughout most of August, market breadth has been weak, causing breadth oscillators to sustain sell signals. Despite reaching deeply oversold conditions, it requires at least two days of positive breadth to transition them from this state to a buy signal – a condition that hasn’t yet been met. Over the past eight trading days, New 52-week Lows on the NYSE have outpaced New Highs. While this nullified the long-standing buy signal from this indicator, it now stands neutral. A sell signal necessitates New Lows exceeding 100 issues for two consecutive days. Despite the recent surge in New Lows, it hasn’t been sufficient to trigger a sell signal. These indicators, often referred to as “market internals,” align with SPX’s decline, reflecting predominantly negative sentiment. In contrast, volatility metrics have largely remained subdued, reflecting a bullish outlook for stocks. The “spike peak” buy signal from VIX a few weeks ago still holds, alongside the persistence of the intermediate-term trend of the VIX buy signal. This latter signal would be invalidated if VIX closes above its declining 200-day Moving Average – a level it briefly touched this week. Volatility derivatives, in terms of the upward-sloping term structures of VIX futures and CBOE Volatility Indices, retain their bullish disposition. Moreover, VIX futures trade at substantial premiums compared to VIX. Hence, we’re maintaining a low-delta “core” bullish position as long as SPX remains above 4330, while making trading decisions based on other indicators. SPX has moved above its -3σ Band, triggering a “classic” modified Bollinger Band buy signal. However, for a McMillan Volatility Band (MVB) buy signal to materialize, SPX would need to reach 4459 or higher. If SPX trades at 4459 at any point, consider buying 1 SPY Oct (20th) at-the-money call and selling 1 SPY Oct (20th) call with a striking price 18 points higher. To manage the relatively higher cost of these October options, we’re using a bull spread. This signal holds unless SPX closes below its -4σ Band, which would negate the signal. The trade aims for SPX to touch the +4σ Band. New Recommendation: Archer-Daniels-Midland (ADM) A recent weighted put-call ratio sell signal has emerged for ADM. Since the stock fell below support, we’re acting on this signal. Consider buying 3 ADM Oct (20th) 82.5 puts in line with the market. ADM: 81.16 Oct (20th) 82.5 put: 3.00 bid, offered at 3.20 Follow-up action: All stops are mental closing stops unless otherwise noted. For SPY spreads, we’re following a “standard” rolling procedure: if the underlying hits the short strike in any vertical bull or bear spread, roll the entire spread. Maintain the same expiration and retain the distance between strikes unless instructed otherwise.

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