Technical Stock Market Briefing for Day & Swing Traders
| By Harry Boxer, Technical Market Analyst
Powell’s Speech Sparks Friday Rally
Stock markets rallied sharply on Friday after Fed Chair Jerome Powell’s speech at the Jackson Hole symposium, bringing the S&P 500 to a modest gain for the week. That end-of-week rally sharply reversed a downward drift that had sent the S&P 500 to a five-session negative streak.
For the week, the S&P 500 gained just 0.03%, but managed to eke out a gain after experiencing losses most of the week. Nasdaq also came back strong on Friday, but still ended up a bit lower on the week, losing 0.06%.
Overall, Powell’s speech gave a boost to both stock and bond markets. The S&P 500 rallied over 1.5% on Friday, with interest-rate sensitive sectors like consumer discretionary, industrials, and real estate leading the way higher.
Market Rotation Beneath the Surface
Underneath the surface, equity markets experienced a bit of a rotation: Mega-cap technology stocks underperformed, while value and cyclical parts of the market played catch-up.
An index of U.S. large-cap value stocks outperformed its growth-style counterpart by a wide margin for the second week in a row, trimming some of the growth style’s year-to-date performance edge. A value benchmark finished with a 1.8% return for the week versus a –0.8% decline for the growth index, which was weighed down by lagging results from many technology stocks.
Rate Cut Odds Increase
The probability of a rate cut at the September FOMC meeting rose from about 75% to about 89%. According to CME FedWatch, markets are now pricing in two rate cuts this year—in September and December—which, in our view, is a reasonable base case.
Outlook: Rally With Volatility Ahead
After a strong rally in the stock market, with the S&P 500 now up about 30% since the April 8 lows, some bouts of volatility are likely in the weeks ahead. This comes as we move toward the seasonally choppier months of September and October.
Historically, it’s normal to experience two to three pullbacks in the market in any given year, especially in years with elevated uncertainty, and I can foresee coming bouts of volatility in the weeks ahead as a result.
In any case, as we always do at thetechtrader.com, we will “Trade What We See Technically, Not What We Think.”
Get Live Market Analysis As It Happens & Gain an Edge In Trading
Level up your trading by gaining access to real-time market insights, expert technical analysis, and actionable trade setups from 50-year veteran trader and expert analyst, Harry Boxer.
