To The Moon

The final trading week of August kicks off Monday, with all the major indices on track to finish the month with losses. The Dow and S&P have slumped 3.4% and 4%, respectively, since the start of the month, while the Nasdaq lost about 5.3%.

Head & shoulders, knees & toes?

Speaking Friday at the annual central bank conference in Jackson Hole, Wyoming, Powell pointed to some signs of continued economic growth and strong consumer spending, but indicated that the central bank would “proceed carefully” with additional hikes.

“Although inflation has moved down from its peak — a welcome development — it remains too high,” Powell said in prepared remarks. “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”

A Sinking or Soaring September ahead?

SPY averages a little more than -1% on a monthly basis since 1928 for the month of September. S&P500 dropped -8.72% and had a range from $411.72 down to $357.04 in September 2022, a record to behold.

As of Sunday evening, traders are pricing in a nearly 20% chance that the Fed will hike rates again at its upcoming September meeting, according to CME Group’s FedWatch tool.

To pause or hike in September?

“The intention of remaining restrictive still holds this year until the Fed is confident that inflation is starting to move closer to their target,” said Brian Price, head of Investment Management at Commonwealth Financial Network.

“At this point, the market appears to believe that one more interest rate hike is likely before the Fed hits pause,” he added.

Fundamentals:

• 10-year treasury did pull back from 4.35% but has not broken down yet (bond market betting on slower growth).

• USD continues to increase which is not good for American companies (products are too expensive)

⚠️ Calls above 441.3, puts below 439.5 on 8/28 

Technicals:

• Still below 50SMA on Daily chart, bearish sentiment.

• Heavy resistance now forming at $444-$445 level, break up for a bullish momentum.

• $430-435 demand zone forming as support.

Wall Street this week will parse more economic data — looking at August’s Dallas Fed index — ahead of Friday’s monthly jobs report. The results could offer more insight into the health of the consumer, the macroeconomic backdrop and the U.S. labor market.

Earnings for the week

Economics:

• PCE and Unemployment data comes out Wed-Frid this week. Market is data dependent.

• Economy is strong enough to take on a few more rate hikes.

• Wages continue to climb so inflation might come back.

• Housing market has high rates but has not slowed down.

Economic news ahead

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