“What’s Next for the Markets?”
On Thursday, August 26th – As the Chief Market Strategist at Slatestone Wealth – I will be interviewing CNBC’s Ron Insana about the State of the Union…. With the start of the Jackson Hole Fed Meeting that afternoon, this interview could not be timelier. What to expect? What does the split in thinking mean for consensus? What is the outlook for interest rates? Which sectors will outperform, and which will underperform?
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Did the weakness in stocks yesterday morning turned into a ‘dead cat bounce’? As the morning turned to afternoon. Stocks which were under pressure in the pre-mkt and then again during the regular trading session found the worst levels of the day to be at about 9:30 am….The S&P opened down 18 pts but then fell another 18 pts – about 0.8% to trade as low as 4367 – before the bell finished ringing, Now remember – I ventured to say that the S&P would test its trendline support at 4345 – it did not, but it did tease – just a little….And the tease means that she is coming back….
The Dow fell 86 pts and then lost another 184 pts or 0.7%, the Nasdaq lost 100 pts on the opening which was the low. Now here is where you need to pay attention…. the Russell opened down and then kept going down – never recovering and in fact closed below its long term 200 dma trendline – and that is not a positive signal and that is also something I pointed out in yesterday’s note. The trendline is at 2152, the Russell closed at 2132…. Hmmmm. The Transports also fell hard – falling 286 pts before ending the day down 184 pts or 1.25%. It closed below its intermediate trendline and is now heading towards its long term trendline at 13,969. Recall that the Transports had fallen better than 12% by mid-July only to attempt to recover, rallying back 5% before once again coming under pressure due to covid concerns and more lockdowns – leaving that index now down 9% as well. So – just for your newbies – 9% is not considered correction territory….10% is….so stay awake.
So just to be clear – the Dow ended the day down 66 pts or 0.2%, the S&P’s up 6 or 0.1%, the Nasdaq up 15 pts or 0.1%, the Russell down 26 pts…. or 1.26% while the Transports lost 184 pts or 1.25%.
The Russell and Transports are now down 9% from the highs reached in early June…. (Right in my sweet spot) but I am waiting for the broader market to fall in line as well. The S&P, Dow and Nasdaq are all down between 2% – 3% from the most recent highs…. clearly not a reason to hit the sell button at all, but nor is it a reason for me to go out and buy (yet). Recall – I think down 7 – 10% should be about right – so I will now look at names in both the Russell and Transports to see what I find…. Now understand, I only have a 10% allocation to the Russell names…so down 9% is not a big concern at all. And like I said in my appearance yesterday with Charles Payne at 2 pm on Fox Business – ‘Unless the thesis for the investment which I bought has changed, there is no reason to bail…in fact the weakness might be the reason to buy more…. but you must do your homework. Click here to watch that segment.
(Today I will be on Fox Business at 11 am with Stuart Varney at Varney & Co. – be sure to tune it).
My sense is that the recovery yesterday in the S&P and Nasdaq was more short covering and bargain hunting…. but did it prove to be a bit pre-mature?
This morning is seeing global markets under pressure and US futures under pressure as well. China coming down hard again on the Tech Sector – privacy issues – as if they are trying to protect privacy – just to be clear – they are not, but that should not be a surprise. It is called the ‘Personal information Protection Law” – and while they are telling us how strict it is on companies – you can expect that all those companies are connected to the main frame in Beijing. They are a communist country, wealth and privacy are not at the top of the list – unless of course you are Xi Xi – Google tells us that he has a net worth of $1.5 billion – not bad for someone who has never had a real job!
The VIX (fear index) is now up 52% since last week as the angst builds….and is likely to go higher today – at least this morning because US futures are under pressure again…Dow futures down 135 pts, S&P’s down 18, Nasdaq down 35 pts and the Russell down another 11 pts…. taking it further into the abyss.
Asian markets closed out the week in the loss column and Hong Kong is now in a bear market – down 21% since the February highs…. Japan lost 1%, Hong Kong lost 1.8%, China down 2%, Australia flat, Taiwan flat and the Kospi (South Korea) down 1.2%.
European markets are also under pressure as morning turns to afternoon…. all those market centers down about 0.3% across the board…not on fire, but under pressure.
Do I need to outline the issues? Really?
The 10 yr. treasury ended the day yielding 1.23%, Gold – is trading at $1783, and oil continues to get slammed as everyone piles on now and pushes the end of the recovery story, which will destroy demand……(Yawn!). With the FED about to make a move and rising delta cases – the traders in the oil pit are accentuating the negatives….and they have managed to take oil down about 12% in the last two weeks…. leaving it at $63.32/barrel. The XLE – Energy ETF is now in bear market territory- falling 20% from the June highs…. time to revisit that one…. not because I want to sell my position, because I want to buy more…as I believe it is now overdone….
Remember you need to assess your risk, you must decide how uncomfortable you can be, for how long and what is your pain point? You also must assess whether the situation is now different than your original thesis. You have time on your side, so I would sit back, let it play out a bit….
There is no eco data today…
Bitcoin is trading at $47,500 and Ethereum is at $$3,200.
The S&P ended the day at 4405 and again looks like it will test lower on the opening…. maybe 4380 ish…. I would not be surprised to see it test at least yesterday’s low at 4367 before deciding what’s next. Trendline support – the 50 dma is at 4345…. Keep your eyes on that level….….
The chatter today will be about the FED, Policy, Infrastructure, and certainly more devastating photos out of Afghanistan as the administration attempts to define what went wrong and why they missed it so badly. Not sure there is really any explanation for that –
In any event – Stick to the plan…. don’t rush. Do your homework and create a list, and maybe it’s the list you already have, but have the list…. if you are a long-term investor building a portfolio, you are not missing anything – You will get the chance to buy stocks at better prices. Talk to your advisor.
Text the word INVEST to 21000 on your cell phone to get my digital business card. Feel free to download it and send me off an email or text. Happy to engage and talk markets, planning, thoughts, concerns, and ideas.
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Take Good Care
Chief Market Strategist, Consultant
Mostacciolli Rigate W/Arugula and Cannelloni Beans
This is a vegetarian dish that is easy and quick to make if you are not a vegetarian then feel free to add some Italian sweet sausage*.
Bring a large pot of salted water to a boil. Add the Mostaccioli and cook until aldente – 8 / 10 mins.
In a sauté pan – heat up some olive oil, crushed garlic and a sliced/chopped “red” onion. Sauté until the onion is soft and translucent. Now add a can of cannelloni beans – juice and all and stir to heat up…about 4 mins or so. Now add the arugula and stir. Arugula will wilt – no worries. Drain the pasta – saving a mugful of the pasta water…. return pasta to pot and add back 1/4 cup of the water to re-moisten. Next add beans and arugula – handful of Parmegiana cheese and toss. Serve immediately in warmed bowls with freshly toasted garlic bread.
*If you add the sausage – do it this way…. grill the sausage…. remove and slice into bite size pieces…. add to the sauté pan BEFORE you add the beans and arugula. Stir and cook for 3 mins or so…. Then add beans etc….