Stock Market Today: August 26th - 30th, 2019

Welcome Stockaholics to the trading week of August 26th!

This past week saw the following moves in the S&P:


Major Indices End of Week:




Major Futures Markets on Friday:


Economic Calendar for the Week Ahead:


Sector Performance WTD, MTD, YTD:








What to Watch in the Week Ahead:

• Monday

Earnings: Caleres

8:30 a.m. Durable goods

10:30 a.m. Dallas Fed manufacturing

• Tuesday

Earnings: Autodesk, Hewlett Packard Enterprises, Bank of Nova Scotia, Bank of Montreal, JM Smucker, Catalent, Eaton Vance, Momo

9:00 a.m. S&P/Case-Shiller

9:00 a.m. Federal Housing Finance Agency House Price Index

10:00 a.m. Consumer confidence

10:00 a.m. Richmond Fed

10:30 a.m. Dallas Fed services

• Wednesday

Earnings: Brown-Forman, Tiffany, Box, Five Below, Guess, H&R Block, Shoe Carnival, Greif, PVH

12:20 p.m. Richmond Fed President Tom Barkin

• Thursday

Earnings: Best Buy, Ulta Beauty, Dell, Workday, Cooper Cos, Marvell Tech, American Outdoor Brands, Toronto-Dominion Bank, Dollar General, Dollar Tree, Abercrombie & Fitch, Hain Celestial, Sanderson Farms

8:30 a.m. Initial claims

8:30 a.m. Real GDP Q2 2nd

8:30 a.m. Advance economic indicators

10:00 a.m. Pending home sales

• Friday

Earnings: Campbell Soup, Yintech Investment

8:30 a.m. Personal income/spending

9:45 a.m. Chicago Purchasing Managers Index

10:00 a.m. Consumer sentiment

 

Stocks, Dollar, Yields Crash; Gold Explodes As Stunned Traders React To Series Of Surreal Events
Jerome Powell's Jackson Hole speech was supposed to be the most important even of an otherwise sleepy, August day day, after which traders could quietly exit for the rest of the day and commence drinking. It did not quite work out that way.

Not only did Powell's speech barely make the top 3 most important events, but Friday ended up being an exercise in surreal market newsflow, and one of the biggest drops of 2019 to boot.

With a few hours left before Jackson Hole, as traders were getting ready to trade Powell's Jackson Hole speech which was a big dud, and did not reveal anything new (as even Trump figured out when he blasted the Fed chief slamming "As usual, the Fed did NOTHING!" and asking "who is our bigger enemy, Jay Powell or Chairman Xi?"), China shocked the market by unveiling that it would retaliate by slapping 10% tariffs on another $75BN in US imports, which sent stocks sharply lower at first. Then, Powell's remarks managed to somewhat stabilize sentiment, and the S&P almost regained all losses... before all hell broke loose and in a vicious tirade, Trump first slammed Powell, effectively calling him an enemy of the state", and then warned he would retaliate to China soon, while ordering US companies (can a US president dictate to companies what they can and can not do?) to find an "alternative" to China.

The result was a violent slam lower in risk assets, with the S&P tumbling over 70 points, the Dow plunging over 500 point, its 3rd such drop in the month of August, which has emerged as the worst month for stocks since December 2018...



... and the VIX soaring, just as dealers had exited their "negative gamma" hedges, forcing them all to load up on VIX futures all over again.



Every sector was lower on massive volume and wide breadth.



That said, not all hope was lost because a margin-call induced puke in the last 30 minutes of trading found support at the critical level of 2,834 below which the market simply will not allowed to pass... for now.



Not surprisingly, as risk tumbled, safe havens, soared, and as the 10Y yield tumbled...



... so did 2Y, which meant that the 2s10s yield was once again dipping in and out of negative territory all day, closing just below 0%.



Amid this wholesale panic out of safe havens, there were two surprises. Not the surge in gold, which exploded higher hitting a six and a half year high of $1,530...



... what was surprising was the plunge in the dollar - as traders feared that Trump would announce an outright currency market intervention to devalue the greenback - however as the yuan plunged even more...



... and even without an official statement from Trump - we are still waiting for the mystery afternoon announcement - the dollar index suffered its biggest one day drop in over a month.



There was not respite in commodities either, with oil tumbling after China announced it would apply tariffs on US oil imports, prompting traders to fear a drop in imminent collapse in global oil demand by the world's largest oil importer.



What is most scary is that the day is not yet over, and we are now waiting with bated breath for the president to deliver on his promise of unveiling some other mystery response to China which he had not shared even with the Fed. As such, we expect that the reason for the violent flush in the last 30 minutes of trading had to do with traders wishing to be flat over a weekend, where any surreal development is now clearly possible.

Stay tuned.

 

Here are the percentage changes for the major indices for WTD, MTD, QTD & YTD in 2019-



S&P sectors for the past week-

 

Second Half August Trading: Historically Weak Too

Following three straight days of gains, the market has recovered a sizable portion of its losses from earlier in the month. Losses earlier in the month and gains over the past three days (prior to today) have tracked August’s typical trading pattern for over the last 21-years quite closely. The magnitude of the moves this year has been larger than average, but the pattern has been tracked.

Due to the magnitude of this year’s moves, August’s performance over the past 21-years has been plotted on the left vertical axis in the chart above and 2019 is plotted on the right. From right around mid-month or now through the end of August, the historical trend has been weaker. DJIA, S&P 500, NASDAQ, Russell 1000 and 2000 have all averaged a loss in August from 1998 to 2018 and they are on track to repeat this year.

Is a Small-Cap Labor Day Rally Coming Soon

In the below chart, forty years of daily data for the Russell 2000 index of smaller companies are divided by the Russell 1000 index of largest companies, and then compressed into a single year to show an idealized yearly pattern. When the graph is descending, large-cap companies are outperforming small-cap companies; when the graph is rising, smaller companies are moving up faster than their larger brethren. The most prominent period of outperformance generally begins in mid-December and lasts until late-February or early March with a surge in January. This period of outperformance by small-caps is known as the “January Effect” in the annual Stock Trader’s Almanac.

In recent years, another sizable move is quite evident just before Labor Day. One possible explanation for this move is individual investors begin to return to work after summertime vacations and are searching for “bargain” stocks. In a typical year, small-caps would have been lagging and could represent an opportunity relative to other large-cap possibilities. As of Friday’s close (August 16, 2019), Russell 2000 is up 10.8% compared to the Russell 1000 being up 15.5% year-to-date. Lagging small-caps and resilient U.S. consumers could be the ideal setup for a repeat of this pattern this year. However, the small-cap advantage does historically wane around mid-September.

September Almanac: No Respite in Pre-Election Years

The start of business year, end of summer vacations, and back to school made September a leading barometer month in first 60 years of 20th century, now portfolio managers back after Labor Day tend to clean house Since 1950, September is the worst performing month of the year for DJIA, S&P 500, NASDAQ (since 1971) and Russell 1000 (since 1979). Sizable gains in September 2012, 2013 and 2017 have lifted Russell 2000 to second worst (since 1979). September was creamed four years straight from 1999-2002 after four solid years from 1995-1998 during the dot.com bubble madness. September gets no respite from positive pre-election year forces.

Although the month used to open strong, S&P 500 has declined eight times in the last eleven years on the first trading day. As tans begin to fade and the new school year begins, fund managers tend to sell underperforming positions as the end of the third quarter approaches, causing some nasty selloffs near month-end over the years. Recent substantial declines occurred following the terrorist attacks in 2001 (DJIA: –11.1%), 2002 (DJIA –12.4%), the collapse of Lehman Brothers in 2008 (DJIA: –6.0%) and U.S. debt ceiling debacle in 2011 (DJIA –6.0%). However, September is improving with S&P 500 advancing in ten of the last 15 Septembers and DJIA climbing in nine.

Leading Indicators Signal Growth Ahead
Posted by lplresearch

Economic Blog

U.S. leading indicators rebounded in July, a good sign for the durability of the expansion.

The Conference Board’s Leading Economic Index (LEI) rose 0.5% month over month, the biggest gain since September 2018, and above consensus expectations for a 0.3% increase. As shown in the LPL Chart of the Day, Leading Indicators Slowing But Growing, the LEI climbed 1.6% year over year.



The LEI, which we include as one of the “Five Forecasters” of our Recession Watch Dashboard, has yet to turn negative this cycle. The index has fallen negative year over year before all nine recessions since 1955.

“Some investors have pointed out slowing LEI growth as a reason for caution,” said LPL Financial Chief Investment Strategist John Lynch. “However, the LEI is signaling moderate U.S. economic growth ahead, with no signs of an imminent recession.”

The LEI is calculated from 10 individual leading data sets, including weekly jobless claims, building permits, and stock prices. This year, the majority of LEI components have boosted month-over-month growth in the index, but more internationally exposed data sets have turned into net drags.

In July, 6 of 10 components rose month over month, but four components—average hours worked, manufacturers’ new orders, new orders for nondefense capital spending, and interest rate spreads—fell month over month. Historically, breadth in LEI components has deteriorated further before a recession began. In contrast, at the end of each of the past six economic cycles, more than half of the LEI components were in decline.

While evidence of slowing growth in leading indicators is disappointing, we are encouraged by what we see outside of manufacturing. Global manufacturing has been the sector hardest hit by prolonged trade tensions and weakened demand, and we don’t expect to see much improvement until a U.S.-China trade resolution is reached. Even then, a recovery in manufacturing may take some time.

Complexity Behind the Fed Rate Cut

Economic Blog

Minutes from the Federal Reserve’s (Fed) July meeting, released August 21, show the complexity of policymakers’ discussions leading up to the first rate cut of this economic cycle.

Policymakers debated what to do amid strong consumer spending, a solid labor market, tepid inflation, sluggish business investment, financial stability, global risks, and the persistent headwind of trade uncertainty. Ultimately, the Fed announced a 25 basis point (0.25%) rate reduction after a vote with two dissents (Fed presidents Esther George from Kansas City and Eric Rosengren from Boston).

The minutes also reinforced Fed Chair Jerome Powell’s description of the rate cut as a “mid-cycle adjustment,” a characterization that was especially evident from upbeat economic commentary. These rate changes, which we’ve referred to as “course corrections,” have been a feature of many economic cycles and have been more of a risk management tool in response to building risks than a response to an impending recession.

“The Fed recognized the growing need for looser policy as insurance against heightened global uncertainty,” said LPL Research Chief Investment Strategist John Lynch. “Lower rates could provide a buffer if uncertainty materially weighs on growth, reducing the chances of a policy mistake or a rush to cut rates before a recession.”

Participants generally agreed that the U.S. economic outlook was solid, even though inflation had slipped a little this year. In fact, domestic economic strength was the driving force behind the two dissents. George voted against a rate cut because there were few signs of weakness in incoming data or the medium-term economic outlook. Rosengren dissented because he saw no “clear and compelling case” for rate cuts, especially given his concerns for financial stability.

The minutes, however, gave few clues on the future path of policy, and participants emphasized the importance of maintaining “optionality” with policy and basing rate decisions on incoming information.

As shown in the LPL Chart of the Day, Investors Expect More Rate Cuts Ahead, investors are positioning for multiple 25 basis point rate cuts through the end of 2019.



We agree that one or two more 25 basis point “insurance” rate cuts could be ahead as the Fed attempts to ease pressure on the Treasury yield curve and global currencies.

Crude Oil's Descending Triangle
Fri, Aug 23, 2019

Earlier this week, crude oil was trading well over 2% higher than last Friday's close. Over the past few sessions, though, oil has given up all of those gains. The catalyst for today's declines are the Chinese retaliatory tariffs on US crude which are expected to dampen demand. This week's negative reversal comes as the commodity ran into multiple points of resistance. For starters, the rally began to stall out mid-week when it met the converging 200 and 50-day moving averages. This also coincided with a downtrend that traces itself all the way back to the highs from late last year. In fact, crude is down around 30% from these previous highs.

Overall, the technical picture for crude oil is not in a great place as the chart is forming a descending triangle pattern. Despite the big gains at the beginning of 2019, over the past few months, crude has been making consistent lower highs and lower lows. Given this most recent failure to retake the moving averages and break out of the downtrend, the next major support level to watch is around $50 which is a level that has held up at multiple times in the past few months. This support also draws back to late last year prior to the collapse in December.



Yield Curves: Another Record Streak Bites the Dust
Fri, Aug 23, 2019

After the 3-month vs 10-year US Treasury yield curve first inverted earlier this year, the market has shifted its focus to the 2-year vs 10-year part of the curve which had yet to reach inverted levels. That was, until yesterday. While the 10s2s curve flirted with inverted territory for the last few days on an intraday basis, Thursday was the first time in more than a decade that the closing yield on the two-year US Treasury was above the yield on the 10-year. And with another closely watched part of the curve moving into inverted levels, recession fears increased.



As the chart above illustrates, it has been a while since the 10s2s curve was inverted. In fact, the streak that just ended was the longest on record going back to 1977, and it wasn't even close. Going back to 1977, there have only been three prior streaks where the 10s2s curve was inverted for more than 1,000 days, and never before had the curve been positively sloped for more than 2,000 days. The current streak, though? 3,054 days. It was fun while it lasted!



Get Ready For Lower Gas Prices
Fri, Aug 23, 2019

Gas prices have recently declined more than 10% based on the national average price from AAA. After hitting a 2019 peak of $2.90 in early May, we have now seen both a lower high and a lower low, taking prices back to levels last seen back in March. Purely from a chart perspective, the outlook for gas prices doesn't look positive as the recent trend lower follows a failed rally off the 2018 lows that stalled out just below the high from earlier that year.



In addition to a weak technical picture for gas prices, seasonal factors are also pointing to lower prices through year-end. As shown in the chart below, when we compare prices so far in 2019 (red line) to a composite of the seasonal pattern going back to 2005 (blue line), this year is following the historical script relatively closely. Prices rallied through early May but then lost momentum heading into the summer driving season. Normally, prices peak around Memorial Day and basically move sideways with a downside bias during the summer. This year, though, the move higher to start the year was much stronger than average, while the summer drift lower had more momentum behind it as well. If the pattern continues to hold for the final four months of 2019, expect prices to keep falling. Going back to 2005, gas prices have experienced a median decline of 9.8% from 8/22 through year-end with positive returns just 35% of the time. That's a move that would provide another boost to an already strong consumer.



Adapt or Die
Thu, Aug 22, 2019

A common characteristic of most investors and traders is to always be on the lookout for patterns and connections between various asset classes. Whenever one correlated asset confirms the move in another it adds a layer of confidence to an investor's thesis. One long-held example is the Dow Transports as a leading or coincident indicator for the broader market. For decades now, many investors have followed the transports for confirmation of the broader market moves. If the transports — which move all of the physical goods in the economy — rally, it suggests that the broader market will be strong, while periods when the transports start to roll over are read as a signal that there's an underlying weakness in the economy.

As the US economy has become more service and digital-oriented in nature, there has been a valid argument made that the transports have lost some of their importance as an indicator of the broader economy. Along these lines, we have suggested that rather than transports, semiconductors may represent this century's 'transports' as they are a part of just about everything in this digital age. Whether you agree with this or not isn't important, but the important takeaway is that just because two asset classes have been highly correlated in the past doesn't mean that they will remain that way in the future. It's one thing to recognize a correlation between two asset classes, but it's much more important to understand why they are correlated and be on the lookout for factors that may change the status quo in the future.

One example of a radical change in a relationship between two asset classes is the interaction between the relative strength of growth and value stocks versus the slope of the yield curve. From 2002 through 2011, the two were closely correlated. As the curve flattened in the early part of this century, growth stocks underperformed value by a wide margin (falling blue line). Then in mid-2007, as the curve steepened and came out from inverted territory, growth stocks started to rip higher relative to value. Beginning in 2009, though, the curve stopped steepening and the relative strength of growth relative to value stalled out. The two series were so closely joined at the hip during this ten-year stretch that the correlation coefficient between the two was +0.82, which is indicative of two series moving in lockstep with each other.



If the paths of the yield curve and the relative strength of growth versus value couldn't be separated from 2002 through 2011, the relationship soured in 2012 when the two came down with a case of the ten-year itch. At that point, they couldn't separate fast enough. The chart below shows the same two series from the start of 2012 through the present. Now, when one goes up the other goes down and vice versa, as the paths are nearly exact opposites. In fact, in the nearly eight years since 2012, the correlation between the two is -0.90.



In the chart below we have shown the two series over the entire time period spanning 2002 through 2019. The non-shaded area represents the period covered in the first chart, while the shaded area covers the second period. Right around the time where the shaded period starts is when the positive correlation turned on a dime, and beginning in 2013 when the curve started to flatten, investors who were still hanging on to the idea that a flatter yield curve was a green light for value stocks, saw what turned out to be an extended period of misery relative to the performance of growth stocks. In the words of Intel Founder Andy Grove, "Adapt or Die."



Nasdaq 100 to S&P 500 Ratio
Wed, Aug 21, 2019

Below is a chart of the Nasdaq 100 going back to 1990. While it took 15+ years for the index to make a new all-time closing high following its March 2000 peak, the index is currently 65% above those March 2000 highs.



Below is a ratio chart of the Nasdaq 100's price versus the S&P 500's price since 1990. The ratio started well below 1 in early 1990 but quickly overtook the S&P in price by the mid-90s. As you can see, the ratio spiked dramatically above 3 during the peak of the Dot Com bubble in late 1999. The Nasdaq 100 then gave up much of that outperformance versus the S&P 500 over a 2-3 year period where the ratio got all the way back down to 1, but since then it has been steadily trending higher to its current level of 2.65. While it went through a bubble and a burst over a 5-year period, the Nasdaq has been outperforming the S&P 500 for a long time now.

 

Here are the current major indices pullback/correction levels from ATHs as of week ending 8.23.19-


Here is also the pullback/correction levels from current prices-


...and here are the rally levels from current prices-

 

​

Here are the upcoming IPO's for this week-

(NONE SCHEDULED FOR THIS WEEK)

 

Stockaholics come join us on our stock market competitions for this upcoming trading week ahead!-

========================================================================================================

• Stockaholics Daily Stock Pick Challenge & SPX Sentiment Poll for Monday (8/26) <-- click there to cast your daily market vote and stock pick!

• Stockaholics Weekly Stock Picking Contest & SPX Sentiment Poll (8/26-8/30) <-- click there to cast your weekly market vote and stock picks!

• Stockaholics Weekly T/A Charting Challenge (8/26-8/30) <-- click there to participate!

========================================================================================================

It would be pretty sweet to see some of you join us and participate on these!

I hope you all have a fantastic weekend ahead!

 

Stock Market Analysis Video for August 23rd, 2019
Video from AlphaTrends Brian Shannon


ShadowTrader Video Weekly 8.25.19
Video from ShadowTrader Peter Reznicek

 

Here is a look at this upcoming week's Global Economic & Policy Calendar-

(GLOBAL ECONOMIC AND POLICY CALENDAR NOT YET POSTED!)

 

​

Here are the most anticipated Earnings Releases for this upcoming trading week ahead.

***Check mark next to the stock symbols denotes confirmed earnings release date & time***

Monday 8.26.19 Before Market Open:

Spoiler: CLICK HERE TO VIEW MONDAY'S AM EARNINGS TIMES & ESTIMATES!

Monday 8.26.19 After Market Close:

Spoiler: CLICK HERE TO VIEW MONDAY'S PM EARNINGS TIMES & ESTIMATES!

Tuesday 8.27.19 Before Market Open:

Spoiler: CLICK HERE TO VIEW TUESDAY'S AM EARNINGS TIMES & ESTIMATES!

Tuesday 8.27.19 After Market Close:

Spoiler: CLICK HERE TO VIEW TUESDAY'S PM EARNINGS TIMES & ESTIMATES!

Wednesday 8.28.19 Before Market Open:

Spoiler: CLICK HERE TO VIEW WEDNESDAY'S AM EARNINGS TIMES & ESTIMATES!

Wednesday 8.28.19 After Market Close:

Spoiler: CLICK HERE TO VIEW WEDNESDAY'S PM EARNINGS TIMES & ESTIMATES!

Thursday 8.29.19 Before Market Open:

Spoiler: CLICK HERE TO VIEW THURSDAY'S AM EARNINGS TIMES & ESTIMATES!

Thursday 8.29.19 After Market Close:

Spoiler: CLICK HERE TO VIEW THURSDAY'S PM EARNINGS TIMES & ESTIMATES!

Friday 8.30.19 Before Market Open:

Spoiler: CLICK HERE TO VIEW FRIDAY'S AM EARNINGS TIMES & ESTIMATES!

Friday 8.30.19 After Market Close:

Spoiler: CLICK HERE TO VIEW FRIDAY'S PM EARNINGS TIMES & ESTIMATES!

NONE.

 

And finally here is the most anticipated earnings calendar for this upcoming trading week ahead-
($BBY $MOMO $OKTA $DG $VEEV $ULTA $OSIS $BILI $DLTR $TIF $NTNX $ICLK $ADSK $SJM $PLAN $WDAY $ANF $DELL $BURL $FIVE $BWAY $JT $MRVL $BNS $BMO $HPE $COTY $TD $ITRN $HEI $EXPR $JILL $WMWD $MOGU $CAL $GES $CPB $BOX $PVH $BIG $CHS)


If you guys want to view the full earnings post please see this thread here-

• Most Anticipated Earnings Releases for the week beginning August 26th, 2019 <-- click there to view!

 

so the market (spx) has been down 4 week in a row ... interestingly enough, since the bull market began 10 years ago, only one time has it been down for 5 weeks in a row, that was back during the debt ceiling fiasco in 2011 if you guys remember. that year the spx was down for 6 weeks in a row.

so ya, lengthy weekly losing streaks (of at least 4 weeks) in the market have been pretty rare over the past decade at least