4 day week, 4 red days
Last week we had ended the latter half of the week with a big down day, and then an inside day. Still, in the last letter I felt that we may continue down for the start of this week, but could potentially see a rally into the end of the week with GDP on Thursday.
We did start the short week off red, but that continued through today. At the time of writing, around 1:30, there is a small rally going on, but likely not enough to undo the damage for the day.
Let’s dive into the details of this week, and then look towards next week, to see if we can help define our lean.
Market Review
We noted last week that macd/rsi had started to calm down, and this week that continued. Macd has officially turned red, so the likelihood of continued chop has increased in my opinion. Had green dipped and then resumed, we could have seen a quicker recovery, but it’s looking like that won’t happen. SPX is down 1.7% on the week, but as you can see it so far has been supported by the 50d sma. The 20d tried to hold this AM, with a brief rally before giving it all back and selling off further.
I have been in my 5160 puts for 11 days now, but this week I was able to close two sets of calls. The first set was a half position, but the second was just shy of a full position.
Tweets
Twitter acted up for me this week and I “lost” a bunch of notifications. So this section will be a little short this week.
Topdown has been going on about reflation for several months, but this chart does a good job at illustrating the state of things. While CPI is seemingly ok, PPI is not. That said, this is “Net Percentage of Countries”, not the US specifically.
Companies flush enough with cash, apparently thinking they are cheap. Apart from leaders, that’s probably true. Bodes well for the coming months.
Quick Charts
FSLR continues to consolidate. I’m interested in adding some around 252-254 area.
I felt that AAPL could come back to the 185 area, but it has held up well through the selling this week, up .3% on the week, so I added some short puts here.
VIX up 20% this week, good for us sellers, and it does look like it may be finding resistance.
IWM down .5% this week, it has not hit new highs recently like some of the other indexes. It does look attractive to me. The weekly and daily chart both look like consolidation is winding up, and looking ready to resume productive activity. I sold some puts here.
Unsurprisingly, small move down in spx >50d, from 48.8 last week to 43.2 this week.
Fear and greed went from neutral to fear this week.
Last week I noted that NAAIM had seemed to be front running the market, and that the increase last week could result in the market drifting higher. While that didn’t pan out, NAAIM only went from 94.5 to 92, so not much of a loss.
Earnings and Events
Last Week
Here are the earnings from this week that I was interested in. I’ve listed their weekly % change.
Elf had good earnings last week, but the chart is still cooling off. Will be good to check back in again next week. Terrible earnings this week, with CHWY doing well and everything else pretty bad, even Cost.
CHWY +27%
CRM -17%
PATH -36%
DG -8%
COST -2%
ULTA +2.2% (jumped quite a bit, but gave it all back)
MDB - not on my list -33%
This Week
Next week I will be looking at the earnings for: crwd, lulu, nio, docu. But really….not interested in anything.
PMI, JOLTS, Jobless, nonfarm payrolls, seems the theme of next week is job related. I would think employment would be going down as well as openings, but as we all know, it matters more what expectations are and reception.
Last week the cut was set for November, and that has moved up to September, though it’s a very tight race between a cut and a pause. Recent releases have made it seem like the economy is softening, which should allow the Fed to cut without too much backlash.
Thoughts
On 6/13 the /es contract rolls from June to Sept contracts
New highs were made just a week ago, but it’s been quite demoralizing this week, with 4 red days in SPX. The 20d gave out, and now we’ve bounced on the 50d
Earnings were terrible these past two weeks, but companies are buying back their stocks, allowing them to do offerings in the future at higher prices.
Rating
My attempt at being clearer on my expectations for the upcoming week:
Bullish
Bullish/Neutral
Neutral/Bullish
Neutral
Neutral/Bearish
Bearish/Neutral
Bearish
I thought we would end the week green this week, fail. Next week, I’m sort of feeling the same thing, though. Chop around here, above the 50d sma, and then possible head higher. Let’s go with a #3. If the 50d doesn’t hold though, I’m looking for SPX to fall to 5110, not my base case, but very possible.
Conclusion
Previously I spoke about how I was feeling bearish and was unable to shake it. As the market will, as I finally was able to embrace the bull story, it fell all week. Luckily, I didn’t go full bull and was in a fairly neutral position overall.
I look to continue that through next week, as I don’t believe we will go in either direction very quickly. Maybe a close closer to the 50d early next week, ending the week closing under but near the 20d.
Good luck out there!
As always, staying realistic and nimble is key to moving forward productively.
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