As we work our way through the last week of summer, we know that trading volumes should be lighter and should stay within a tight trading range.
The traders sitting at the controls were likely told not to let the market fall apart while the higher-ups wrapped up their vacations.
Today I want to cover some recent emails I’ve received and then look at why we have an increase in volatility.
What happens when you hope a single ticker will bear the brunt of the entire market? The positive momentum leading into Nvidia’s (NVDA) earnings report was halted at the end of the week. Even though NVDA had blowout earnings that showed a pot of gold at the end of the AI rainbow, investors still sold news after bidding it higher all week heading into the announcement as the hope of lowering interest rates dwindled further. While weakness in the economy will help the Fed decide to lower interest rates, it means the recession may finally be here, and that spells trouble for investors.
We are at a point in time when bad news becomes good news for the global markets.
Mid-week markets rose on weaker-than-expected U.S. and European economic news, and the Hope Machine was again flipped to the ON position.
Investors used the poor data to feed their hope that the Fed and ECB will be forced to pause interest rate hikes.
But what will the Fed do after Nvidia (NDVA) crushed earnings and gapped higher?
Well, I will tell you what the oddsmakers are thinking…
Bond yields are hurting the market right now and were partially responsible for the pullback earlier in the week.
There’s also global concern that China’s faltering economy will drag down global growth.
And with inflation not behaving, the Fed may need to change its mantra of “higher for longer” to “even higher for even longer” which would hurt equities.
I’ll explain why treasury yields keep going higher and when we may see some relief.
Remember the last time the Fed gathered in Wyoming with other economic geniuses and blessed the markets with words of wisdom? If you don’t remember, I have a chart of it coming up for you, but here’s a hint… It’s enough to make you a believer in portfolio hedging!
This recent pullback has everyone on edge, especially as stories come out of someone making a $1.6 billion bet that the stock market will still crash by the end of the year. While the Fed is in Jackson Hole, Wyoming this week, the economic reports have been scarce, so that allows us to discuss what will stabilize the markets this week and revisit some hedging strategies.
It was another tumultuous week of trading, with earnings winding down and global economic indicators pushing bond yields higher.
Higher bond yields and rising energy prices continued to put pressure on stocks and the market sold off again for most of the week.
Market sentiment continues to be down, but there could be some relief in sight.
I’ll explain why the market might be flashing an oversold signal right now, even if it’s just for a few days.
With all major support lines breached, 50-day moving averages failing, and no positive economic news on the horizon, the market continues to sink lower.
When this happened in February of this year, the S&P 500 saw a 9% dip over six weeks (from peak to trough).
If this is another pullback like that, you still have time to hedge your portfolio against a potential 5% further slide.
That makes it a good time to review what John Hutchinson wrote about a few weeks ago with his laddered bear put diagonal spreads.
Selling has been plaguing the markets for the last few weeks with no end in sight.
How did we get here after experiencing a double-digit rally over the course of four months?
And when will the selling stop and the buying resume?
There are two tickers that need to improve before we see a change in behavior.
By now we’ve heard that the market rally of 2023 was fueled by a handful of tech stocks, but now after a series of tame forecasts from industry giants, we are seeing a rotation out of tech stocks into other sectors.
But, what does that mean exactly? How are we seeing the rotation?
There are a number of ways, but today’s article is all about Relative Rotation Graphs.