[Chart courtesy of MarketWatch.com]

1. Moving the market

The markets faced a significant downturn today, as weak economic data erased an early rally. Major indexes dipped into the red, with the Nasdaq dropping 2.3%, effectively wiping out most of yesterday’s gains.

Initial jobless claims surged to 249,000 for the week ending July 27, surpassing the estimated 235,000. Additionally, the ISM manufacturing index, which reflects economic activity, fell to 46.8, reinforcing my view that the economy is slowing down. In summary, today’s bad news was genuinely bad for the markets, unlike previous instances where bad news sometimes had a positive effect.

Although the Federal Reserve left interest rates unchanged yesterday, this type of data might prompt the central bank to lower rates at their September meeting. However, if inflation remains uncontained, despite traders’ beliefs, the Fed could face a challenging situation, potentially leading to stagflation.

The S&P 500 experienced a sharp decline, losing its 50-day moving average and marking its worst start to August since 2002. Yesterday’s beneficial short squeeze disappeared, with the most shorted stocks plummeting 8% from yesterday’s highs, as noted by ZH.

The MAG7 stocks saw a dramatic reversal, with an early morning 2.5% gain turning into a nearly 5% drop, erasing $430 billion in market cap. Semiconductors followed this trend, hitting their May lows.

Unsurprisingly, bond yields fell, Bitcoin tested its $63,000 level, crude oil prices dropped after initially rising due to Middle East tensions, while gold remained steady.

With volatility on the rise, tomorrow’s jobs report and Amazon’s earnings could further confirm an economic downturn.

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[Chart courtesy of MarketWatch.com]

1. Moving the market

The tech sector saw a significant boost, led by Advanced Micro Devices (AMD), which lifted the Nasdaq to an impressive gain after surpassing second-quarter expectations. Nvidia followed suit, achieving its largest single-day gain ever at 12%. Meanwhile, Microsoft experienced a decline due to underwhelming cloud business performance but managed to recover by the close of trading.

Despite reporting a larger-than-expected loss and disappointing revenue, Boeing’s shares rose by 2% following the announcement of a new CEO.

The Nasdaq led the charge, with all major indexes climbing higher in anticipation of more earnings reports and the Federal Reserve’s decision on interest rates. The Fed opted to keep rates unchanged, but traders were keenly focused on any hints of a potential rate cut in September.

Fed Chair Powell maintained cautious optimism, suggesting that if inflation data continues to improve, a rate reduction could be considered at the next meeting. The Fed’s post-meeting statement was more optimistic, noting progress towards the 2% inflation target. This positive outlook fueled further gains in the tech sector, with companies like Apple, Meta, and Amazon joining the rally.

In July, gold emerged as the top performer, followed closely by bonds, while the dollar and crude oil ended the month in the red. Small Caps surged ahead by 12%, contrasting with the Nasdaq’s 1.5% decline, highlighting a significant divergence.

The most shorted stocks saw substantial gains, sustaining the rally throughout the session. Bond yields dropped, and gold reached its highest monthly closing level ever. Crude oil recovered some losses amid rising tensions in the Middle East, and Bitcoin, although down from its $70k high, still posted gains.

Thanks to the day’s rebound, the S&P 500 managed a slight gain for July. As we move into August, will the index be able to maintain this upward trajectory?

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[Chart courtesy of MarketWatch.com]

1. Moving the market

The stock market opened on a positive note but soon fluctuated around their respective unchanged lines, as traders focused on earnings reports and the Federal Reserve’s policy meeting. By the end of the session, only the Dow managed to close in positive territory, while the S&P 500 and Nasdaq ended in the red.

Interestingly, despite the Nasdaq being the top performer year-to-date and Small Caps lagging, today marked a point where both indices realigned.

Earnings reports have been well received so far, with about 80% of the more than 230 S&P 500 companies that have reported beating expectations. Analysts seem comfortable with the consensus earnings per share (EPS) and the corporate commentaries provided.

The two-day Federal Reserve meeting began this morning, with traders eagerly awaiting clearer signals about the timing and extent of rate cuts expected for the rest of the year. The likelihood of a rate cut in September has now risen to 100%.

The MAG7 stocks experienced a tumble but managed to rebound from their lows by the close. Meanwhile, most shorted stocks and semiconductors faced significant declines, reminiscent of last year’s performance.

The dollar suffered volatility but ended the day unchanged, while gold prices steadily increased. Bond yields slipped, Bitcoin approached $66,000, but Nvidia had a particularly rough day, losing nearly 8%.

This raises the question: Is this pattern still in play but on a much larger scale?

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[Chart courtesy of MarketWatch.com]

1. Moving the market

With a busy week of earnings ahead, the major indexes began the session on a positive note.

However, after much fluctuation, they ended nearly unchanged. The tech sector is poised for significant movement as industry giants like Microsoft, Meta, Amazon, and Apple are set to report their earnings in the coming days.

Additionally, the Federal Reserve is scheduled to announce its latest policy statement on Wednesday. Although an interest rate cut is not anticipated, traders will be closely analyzing the Fed’s language for any hints of dovish changes that might occur during their September meeting.

Last week was marked by volatility in the markets, with major indexes showing divergence: the S&P 500 and Nasdaq declined, while the Dow and Small Caps saw gains. The tech sector’s cooling off contributed to the S&P 500 and Nasdaq’s drop.

Small Caps fell today as the short squeeze lost momentum, bond yields remained stagnant, and expectations for rate cuts in 2025 increased. The dollar strengthened, gold prices remained steady, and crude oil prices retreated to two-month lows. Bitcoin’s value dropped from $70k to $67k after the administration decided to transfer $2 billion from its stockpile.

It seems that traders and markets were on edge today, anticipating the Fed meeting and major earnings releases later this week. These upcoming events will certainly impact market sentiment.

But in which direction?

Continue reading…

2. Current “Buy” Cycles (effective 11/21/2023)

Our Trend Tracking Indexes (TTIs) have both crossed their trend lines with enough strength to trigger new “Buy” signals. That means, Tuesday, 11/21/2023, was the official date for these signals.

If you want to follow our strategy, you should first decide how much you want to invest based on your risk tolerance (percentage of allocation). Then, you should check my Thursday StatSheet and Saturday’s “ETFs on the Cutline” report for suitable ETFs to buy.

3. Trend Tracking Indexes (TTIs)

Despite several early attempts to rally, the major indexes ultimately closed the session with minimal change, hovering just around the unchanged line.

Similarly, our TTIs showed little direction throughout the day, though they did manage to close slightly higher.

This is how we closed 07/29/2024:

Domestic TTI: +6.74% above its M/A (prior close +6.59%)—Buy signal effective 11/21/2023.

International TTI: +5.82% above its M/A (prior close +5.80%)—Buy signal effective 11/21/2023.

All linked charts above are courtesy of Bloomberg via ZeroHedge.

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