Bulls have the edge. Can they build on it?
DOW Friday Closing Price - 45631
SPX Friday Closing Price - 6466
NASDAQ Friday Closing Price - 23498
RUT Friday Closing Price - 2361
The Fed Chief Powell announced on Friday that due to growing risk to the economy, that the Fed may start cutting interest rates. In essence, the continuing health of the economy has now taken a step above inflation in importance, as far as the Fed is concerned. The announcement immediately generated a strong rally with the DOW gaining 2.6% in value, the SPX gaining 2%, the NASDAQ gaining 2.2% and the RUT gaining 4.8%. The chances of a 25% rate cut in September grew from 70% to 85%.
The rally was strong and caused the DOW to make a new all-time intraweek, daily and weekly closing high. Nonetheless, the SPX did not make an all-time intraweek or daily closing high given that it had a high of 6478 and the all-time intraweek high is at 6481 and closed at 6466 and the all-time daily closing high is at 6468. It did make a new all-time weekly closing high at 6466 but then only by 19 points (.027%) as the all-time weekly closing high was made the previous week at 6449.
The NASDAQ (and the Tech sector) did participate in the rally but not in any kind of an indicative way. The index did generate a red weekly close (in spite of the news) and the dichotomy with the DOW continued to be negative to the overall market. The red weekly close should not have happened with the news that came out, if and when it was truly a positive for the market to continue the uptrend.
In addition, the RUT was the big winner this week, having almost doubled the percentage rally over the DOW and more than doubling the rally over the SPX and the NASDAQ. When small cap stocks lead the way, it generally means that a top (or at least a correction) to the overall market is on the horizon.
In considering all of the above, it must be remembered that the SPX continues to be the main index that represents the overall market, and the fact that the bulls were unable to make a bull statement, does keep the door wide open for at least a correction to begin. Keeping in mind that lowering interest rates in a slowing economy is more of a negative than a positive (as it means that things overall are worsening), the rally this week was more of a "knee-jerk reaction" than anything actually positive.
No big/catalytic economic or earnings reports are scheduled to come out this week. The Durable Goods number and the Consumer Confidence number are due out on Tuesday and then basically nothing of any consequence until Friday, which is when the PCE prices indexes (inflation) comes out on. The latter two have "some" importance. The Consumer Confidence number is expected to come out at 97% and the PCE number at .2%. a lower number in the former or a higher number in the latter could have some effect, but not likely much unless way out of line.
As far as what to look for in the charts this week: In the DOW, if the previous all-time daily closing high at 45014 is broken, it would be a negative. In the NASDAQ, the 23849 and the 23142 levels are important if broken. The former to the upside and the latter to the downside. In the RUT, the 2328 and the 2442 levels have meaning. Having said that, in neither of these indexes are any of those levels likely to be in play this week. This means that the SPX is likely to be the only one with levels close-by enough that would be indicative in any way. To the upside, the 6468 level (on a daily closing basis) continues to be indicative, if a confirmed break occurs. Confirmation would come if the index makes a new all-time intraweek high at 6481. To the downside, a daily close below 6370 would be indicative, especially if confirmed with a break below the recent intraweek low at 6343.
I do not expect any signals of consequence to occur this week, but if something does occur, it will likely be to the upside, with the SPX being the index that would do it.
DOW Friday Closing Price - 45631
SPX Friday Closing Price - 6466
NASDAQ Friday Closing Price - 23498
RUT Friday Closing Price - 2361
The Fed Chief Powell announced on Friday that due to growing risk to the economy, that the Fed may start cutting interest rates. In essence, the continuing health of the economy has now taken a step above inflation in importance, as far as the Fed is concerned. The announcement immediately generated a strong rally with the DOW gaining 2.6% in value, the SPX gaining 2%, the NASDAQ gaining 2.2% and the RUT gaining 4.8%. The chances of a 25% rate cut in September grew from 70% to 85%.
The rally was strong and caused the DOW to make a new all-time intraweek, daily and weekly closing high. Nonetheless, the SPX did not make an all-time intraweek or daily closing high given that it had a high of 6478 and the all-time intraweek high is at 6481 and closed at 6466 and the all-time daily closing high is at 6468. It did make a new all-time weekly closing high at 6466 but then only by 19 points (.027%) as the all-time weekly closing high was made the previous week at 6449.
The NASDAQ (and the Tech sector) did participate in the rally but not in any kind of an indicative way. The index did generate a red weekly close (in spite of the news) and the dichotomy with the DOW continued to be negative to the overall market. The red weekly close should not have happened with the news that came out, if and when it was truly a positive for the market to continue the uptrend.
In addition, the RUT was the big winner this week, having almost doubled the percentage rally over the DOW and more than doubling the rally over the SPX and the NASDAQ. When small cap stocks lead the way, it generally means that a top (or at least a correction) to the overall market is on the horizon.
In considering all of the above, it must be remembered that the SPX continues to be the main index that represents the overall market, and the fact that the bulls were unable to make a bull statement, does keep the door wide open for at least a correction to begin. Keeping in mind that lowering interest rates in a slowing economy is more of a negative than a positive (as it means that things overall are worsening), the rally this week was more of a "knee-jerk reaction" than anything actually positive.
No big/catalytic economic or earnings reports are scheduled to come out this week. The Durable Goods number and the Consumer Confidence number are due out on Tuesday and then basically nothing of any consequence until Friday, which is when the PCE prices indexes (inflation) comes out on. The latter two have "some" importance. The Consumer Confidence number is expected to come out at 97% and the PCE number at .2%. a lower number in the former or a higher number in the latter could have some effect, but not likely much unless way out of line.
As far as what to look for in the charts this week: In the DOW, if the previous all-time daily closing high at 45014 is broken, it would be a negative. In the NASDAQ, the 23849 and the 23142 levels are important if broken. The former to the upside and the latter to the downside. In the RUT, the 2328 and the 2442 levels have meaning. Having said that, in neither of these indexes are any of those levels likely to be in play this week. This means that the SPX is likely to be the only one with levels close-by enough that would be indicative in any way. To the upside, the 6468 level (on a daily closing basis) continues to be indicative, if a confirmed break occurs. Confirmation would come if the index makes a new all-time intraweek high at 6481. To the downside, a daily close below 6370 would be indicative, especially if confirmed with a break below the recent intraweek low at 6343.
I do not expect any signals of consequence to occur this week, but if something does occur, it will likely be to the upside, with the SPX being the index that would do it.
