To The Moon

The significance of a time window lies in the fact that once it is realized, the amplitude of fluctuations becomes substantial. As we step into August, the U.S. stock market has experienced three consecutive weeks of decline, catching many investors off guard.

The 2023 Economic Policy Symposium, titled "Structural Shifts in the Global Economy," will be hosted by the Federal Reserve Bank of Kansas City in Jackson Hole from August 24th to 26th. Powell will deliver a speech on the economic outlook. In recent years, Powell has delivered opening keynote addresses at this three-day conference, during which investors will attempt to gather the latest clues about the economic outlook and potential interest rate changes.

Jackson Hole Is Jerome Powell's Big Moment. What to Expect From His Speech. - Barrons

The worst part hasn’t arrived yet?

Despite this, major U.S. stock indices like $NASDAQ(.IXIC)$ and $S&P 500(.SPX)$ have not fallen below May moving averages. From a market psychology perspective, the state of panic has not yet set in. Thus, this implies that the rapid decline associated with the panic phase has not yet arrived, and it is still too early to consider bottom.

Since the disappointing July non-farm payroll data in the United States, the market has once again begun to anticipate and price in economic recession. Therefore, unfavorable economic data releases in the second half of the year are likely to trigger an overall market decline.

This impact won't be limited to stock indices; other commodities will also be affected (after all, high-priced commodities also require robust economic demand to support their prices). Thus, except for the 2-year U.S. Treasury bonds, it's advisable to watch and wait for other asset classes, rather than blindly going long.

Technical position of the US stock market rebound ahead of Jackson Hole

The current declines in $E-mini Nasdaq 100 - main 2309(NQmain)$ and $E-mini S&P 500 - main 2309(ESmain)$ are not very significant, being less than 10%. There might be a rebound this week ahead of Powell's speech.

Based on the characteristics of last year's U.S. stock market decline, almost all the rebound highs during the decline were situated around the 20-day moving average. This implies that the 20-day moving average will continue to serve as a pivotal point for both bulls and bears. Investors can consider to short when the market rebounds to the 20-day moving average.

In 2022, market continue to fell when it rebounded to 20 MA.

Investors should stay cautious in August - October

The highest risk period for the entire financial market this year falls between August and October. Investors should be cautious during this timeframe to secure victory.

Even the recently strongest crude oil prices could face significant unexpected declines in the face of impending economic recession. Therefore, U.S. Treasury bonds remain relatively safe, and other asset classes are suggested to be observed for bullish signals after October.

As long as there are signs of dovishness from the Federal Reserve and an interest rate reduction cycle is initiated, the relatively turbulent financial market could transition into a more easily tradable phase. Thus, for now, preserving strength is key, as future opportunities will be abundant.