To The Moon

As of August 16th, $DJIA(.DJI)$ has declined by 1.72% since the beginning of August, $NASDAQ(.IXIC)$ has fallen by 4.98%, and $S&P 500(.SPX)$ has dropped by 3.29%, putting an end to five consecutive months of gains.

Major indices’ pullback reinforces August curse

August curse in the context of the stock market refers to

a historical trend where the month of August tends to be associated with stock market declines or increased market volatility.

Historically, July has been a bullish month for the stock market, but as August approaches, market volatility tends to rise.

Market awaiting dovish news?

The Federal Reserve Bank of Kansas City will host the 2023 Economic Policy Symposium, "Structural Shifts in the Global Economy," at Jackson Hole from August 24th to 26th.

If Powell expresses dovish statements during the event, the US stock market could reverse its current downward trend.

What trading opportunities to focus under August Curse?

1) US stock indices $E-mini S&P 500 - main 2309(ESmain)$ may remain under pressure

S&P 500 might retrace to 4300

The potential for further highs in US Treasury yields and the US dollar remains uncertain. However, as long as yields stay at elevated levels and remain weak, there's no need to be overly concerned about the performance of assets like US stocks and commodities.

Additionally, the weekly volatility of stock indices has been decreasing since October last year. Historically, there's a significant inverse correlation between stock indices and volatility: increased market turmoil leads to index declines, while reduced volatility indicates either market growth or consolidation. Based on these two indicators, under the continued pressure of rising interest rates, the market is likely to remain under pressure.

2) Mid-term buying opportunity in gold $Gold - main 2312(GCmain)$

With precious metals experiencing continuous declines over the past few weeks, the spread between gold futures and spot prices is widening. Typically, this triggers a final round of decline (for futures) and eventually leads to a bottom.

According to previous estimates, a significant breakthrough level would be at $1860.

However, if the market rebounds driven by dovish news, the potential for a rebound in silver $Silver - main 2309(SImain)$ might surpass that of gold.

3) Possibility of retracement for the US dollar and US Treasury yields, but this week's direction matters

The rebound in the US dollar last week maintained the upward trajectory on a weekly basis. Following the patterns of the previous two rounds, there's a good chance that the US Dollar Index $Invesco DB US Dollar Index Bullish Fund(UUP)$ might rise and then retreat this week.

Investors can consider positioning for a retracement in the US dollar. However, if the US dollar remains notably strong after this week's close, exiting positions to hedge against risks might be necessary.

How do you view August Curse?

What trading opportunities do you recommend?

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