Next week marks the first week of September, and since September 1 is the U.S. Labor Day holiday, the market will be closed for one day. Although electronic trading will still take place, it is expected that volatility will remain relatively subdued, and the market trends may not be reliable.
It is advisable to observe more and act less during this period. When trading resumes after the holiday, it will usher in the key U.S. data week at the beginning of the month, accompanied once again by the impact of large-scale non-tradable shareholder (big and small 'non') movements. Although nonfarm payroll data is released monthly and should be routine, the current market expectations have priced in that the Federal Reserve will begin cutting interest rates at the September meeting, with even aggressive expectations of a 50 basis point cut. Such extreme expectations can easily be disrupted by strong nonfarm data, which may reverse the market direction. Good economic data would provide the Fed with justification to delay rate cuts, thus disappointing the market and resulting in negative impacts on financial assets. Therefore, close attention to market changes is warranted.
Technical considerations regarding the adjustment range of U.S. stock indices:
Since there remains approximately a 90% probability of uncertainty, one should consider the possibility of market reversals if the rate cut expectation falls through again. Technically, U.S. stock indices are still trading around their 20-day moving averages without deviating significantly. Hence, risk preparation is essential. Some suggested approaches include: 1) buying put options on ETFs like the SPX with a small amount and full loss acceptance mentality; 2) buying put options on U.S. stock index futures (Nasdaq, S&P) with small amounts, also with full loss acceptance; such purchases serve as insurance to hedge against portfolio downturn volatility; 3) buying instruments that track the VIX index, the fear gauge of the U.S. stock index, which typically rises when the index falls. This last strategy is usually not used frequently but can offer good cost performance during critical times. These methods are examples; traders should select strategies based on their own account conditions.
In terms of technical patterns, the S&P index has formed a rising wedge pattern, which is common in U.S. stock indices. This pattern generally suggests the likelihood of a minor correction. However, large corrections often begin as small adjustments that evolve due to news and sentiment buildup. Therefore, it remains critical to be prepared for risk. Should the S&P index continue to rise following nonfarm data, this pattern would be invalidated, and market tracking should return to monitoring the 20-day moving average.
Caution is also advised regarding the potential for a phase adjustment after gold’s recent rally.
Last week’s post emphasized that early September is a key timing point for gold price movements, coinciding with the nonfarm data release schedule. This implies gold prices may experience a phase reversal due to nonfarm data. Since gold prices continued to rally last week, there is a possibility they might keep ascending, even accelerating, before or immediately after the data release. This suggests opportunities for short-term traders but is not recommended for long-term investors as the adjustment could bring large price fluctuations and add pressure to investment accounts.
$E-mini Nasdaq 100 - main 2509(NQmain)$ $E-mini S&P 500 - main 2509(ESmain)$ $E-mini Dow Jones - main 2509(YMmain)$ $Gold - main 2512(GCmain)$ $WTI Crude Oil - main 2510(CLmain)$
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