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Dennis DeBusschere, chief market strategist at 22V Research in New York, believes that the recent mini-crash has left markets needing “more consistent optimism” to regain momentum. He noted that although recent economic data has eased recession fears triggered by the last jobs report, it hasn’t been enough to spark a rally. DeBusschere highlighted the latest U.S. jobless claims, ISM Services data, and the New York Fed’s August business leaders survey as signs of a strong economy. “The short-term recession scare appears to be over,” he said. Despite the S&P 500 closing just 1% below its July peak on Monday, DeBusschere identified the upcoming payrolls report on September 6 as the “next big hurdle” for the markets. He suggested that this report could have more impact than Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole Economic Symposium. Given the subdued market response to recent data, DeBusschere believes that even more positive news will be necessary to trigger another rally, especially after the recent unwinding of the Japanese yen carry trade. He also pointed out that expectations for small-cap fundamentals remain weak through the second half of 2024, though there’s potential for improvement if economic conditions strengthen. The Russell 2000 index is currently 6% below its July highs. In the tech sector, valuations continue to be driven by long-term narratives, which, according to DeBusschere, suggests there’s still room for gains even as the AI frenzy cools down. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Strategist Warns of Fragile Market Ahead of Powell’s Jackson Hole Speech As Federal Reserve Chair Jerome Powell prepares for his highly anticipated speech at the Jackson Hole Economic Symposium on Friday, market watchers are expecting him to signal a potential rate cut in September. However, if Powell’s message deviates from these expectations, it could put the stock market’s recent rebound at risk. Powell is set to discuss the economic outlook at 10 a.m. Eastern time during the annual gathering, which traditionally draws top U.S. and global central bankers. Although Jackson Hole is not usually a platform for immediate policy signals, this year’s speech will be closely analyzed due to recent market volatility and shifting expectations for the Fed’s rate path. The stock market has seen mixed reactions to past Jackson Hole speeches. Over the last 20 years, the S&P 500 has averaged a 0.4% gain during the conference, with modest positive returns in the following months. However, last year’s event saw the S&P 500 drop 3.4% after Powell indicated that the Fed’s rate-hiking cycle would continue longer than expected. This year, analysts widely believe Powell will emphasize that inflation is easing, which could justify a rate cut in September. However, Steve Sosnick, chief strategist at Interactive Brokers, cautions that investors may be overly optimistic. He suggests Powell might indicate a more measured approach, signaling that while rate cuts are possible, they will be gradual unless the economic data worsens. “I’m preaching a bit of caution ahead of Jackson Hole,” Sosnick said. “The more the market rallies in advance, the more fragile it might become.” U.S. stocks closed the week higher, with the Dow Jones, S&P 500, and Nasdaq all posting their best weekly gains since early November. In addition to Powell’s speech, investors will also focus on the Fed’s July meeting minutes and key labor market data next week. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Stocks Rally as Economic Data Eases Recession Fears The S&P 500 erased its August losses on Thursday, marking a sharp reversal after the index experienced its worst start to a month in eight years. By the close, the S&P 500 was up 0.4% for August, while the Nasdaq Composite was only slightly down. Analysts attribute the recovery to encouraging economic data and strong earnings reports. Retail sales saw their largest increase in 18 months, and jobless claims came in lower than expected. These positive signals helped to counteract fears of a looming recession and increased the likelihood of a 25-basis-point rate cut by the Federal Reserve next month. Walmart’s impressive earnings also contributed to a broad market rally, with consumer-focused stocks leading the way. The S&P 500’s consumer-discretionary sector had its best day of the year, and a “broad-based buying wave,” as described by Mike O’Rourke of Jones Trading, lifted both tech stocks and cyclical sectors. Jay Hatfield of Infrastructure Capital Advisors noted that the market’s rebound was a response to the “irrational recession fears” that emerged earlier in the month. Despite a rocky start to August, including a spike in the VIX to levels not seen since the pandemic, the market quickly recovered. The VIX has since dropped 60%, its fastest decline on record. Over the past six days, the S&P 500 has climbed 6.6%, and the Nasdaq has gained 8.6%, marking their best performance since November 2022. Technology stocks have led the charge, with the S&P 500’s tech sector up 11.5% in the same period. Small-cap stocks have also rebounded, with the Russell 2000 index rising 2.5% on Thursday. Looking ahead, analysts expect continued support for stocks from strong economic data. However, as O’Rourke warned, if the data remains too strong, it might reduce the need for further rate cuts. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

The S&P 500, Germany’s DAX, and Japan’s Nikkei 225 have all rebounded from their early August lows, a pattern that Christopher Watling, CEO and chief market strategist at Longview Economics, describes as classic pullback behavior. Watling explains that pullbacks typically unfold in three waves: an initial wave of selling, a relief rally that recoups some losses, and a third wave that retests or breaks below the previous lows. Adding to the pattern, safe-haven assets like the yen and Swiss franc also sold off during this rebound. However, Watling notes that his firm’s model still sees room for a further move toward safer assets. The crucial question now is whether a third wave will occur and what might trigger it. Dhaval Joshi, chief strategist at BCA Research’s Counterpoint service, suggests that the yen carry trade and the AI stock bubble are closely linked, and any of three factors could cause them to unravel. Joshi points out that selling the yen has helped inflate AI stock valuations. By comparing movements in the euro/yen exchange rate to the ratio of the 30-year Treasury yield against the forward earnings yield of U.S. tech stocks, he illustrates this connection. He argues that while the sellers of yen may not be the same as the buyers of AI stocks, these actions are intertwined, creating a reflexive relationship. The AI bubble, he says, has been fueled by leverage from borrowing yen. Even though the Bank of Japan has signaled it will keep interest rates low, the yen remains vulnerable, especially if other central banks cut their rates. Joshi also questions the longevity of the AI stock boom, noting that most tech giants from the early 2000s, aside from Microsoft, eventually faded. He believes Nvidia is unlikely to be a long-term winner, and that only a few companies will emerge as dominant players in AI, putting the inflated valuations of today’s AI superstars at risk. Joshi warns that if any of the three pillars—Japanese interest rates, the yen, or AI investments—start to weaken, the entire structure could collapse. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com