Weekly Market Analysis: Recap and Forecast. The Week of August 5, 2024

Last week, all three major indexes booked steep losses, with the S&P 500 falling 2.1% for its worst week since April. The Dow fell 2.1% for the week, while the Nasdaq saw a weekly drop of 3.4%. The Nasdaq closed Friday down 10% from its record close of 18,647.45 on July 10, according to Dow Jones Market Data, landing it in correction territory, a 10% drop from a recent high. Here are some the issues or at least what Wall-street thinks they are:

U.S. stocks dropped Friday after a softer-than-expected jobs report raised worries about economic growth, which followed Fed signals Wednesday that it could cut interest rates at its September meeting. But investors fear the cuts may come too late, as the risk of recession rises.Forward earning concerns: We saw market participants scrambled for hedges amidst a growing panic over interest rates and a looming recession. A notable move was that Warren Buffett reduced 50% of his $AAPL stake last quarter. Tech stocks have been on the ropes following some lackluster earnings, including those by chip maker Intel Corp. INTC -26.06%, and AMZN dropped 8% on earning. Investors have spent most of 2024 celebrating a “Goldilocks” economy running neither too hot nor too cold. A run of weak U.S. economic data to begin August is now stoking fears that the bears have come home.High employment concern: Friday saw the release of a weaker-than-expected July jobs report, which showed slowing payrolls growth and a tick up in the unemployment rate to 4.3%. Coming on after a round of soft data a day earlier, stocks extended a steep selloff.Treasury notes, meanwhile, saw prices soar, sending yields down sharply, particularly for shorter-dated maturities as investors bet that the Fed, now widely accused of having waited too long to begin cutting interest rates, will begin an aggressive round of easing at its September meeting.VIX which measures Fear jump over 20 for the first time since in over a year. The market is experiencing a growth scare and uncertainty in the economy, U.S presidential uncertainty and geopolitical all combined, making a perfect storm.

The result, shown on Thursday and Friday, is that bad news on the economy is no longer viewed as a positive for stocks. For much of the year, weak data helped underscore expectations for Fed rate cuts, helping to fuel the rally. Now, weak data stokes fears of recession and blame the Fed has made a “policy mistake” by waiting too long to begin cutting rates. Time will tell whether the economy is slumping into recession or merely touching down for a soft landing. But we should be prepared for bumpy conditions entering the part of the year typically marked by increased volatility and seasonal weakness.

This week we don’t have much on the economic calendar, except ISM Services at 10am on Monday, Jobless Claims at 8:30am on Thursday and the S&P500 entering 2nd week of earnings with over 175 companies reporting this week. Some name we want to watch for are: $PLTR, $SMCI, $ABNB, $RDDT, $UPST, $SHOP, $DIS, $HOOD, $OXY, $LLY, $DDOG, $NVAX, $TTD. We may have couple trades out of this list.

Both $SPY and $QQQ are now below their 50sma and are right at June low levels. $SPY if holding $530, it may bounce to $535-$540 then $543 area to retest 50sma now turns into resistance. Failing to hold $528, look for to drop to $520-$515-$510 and even $505 level to close a small gap below. $QQQ if holding $445, it may bounce to $465 then $470-$473 to restest its 50sma. Failing to hold $443, it may drop down to $430-$429 its 200sma support. If this level doesn’t hold, which is possible with techs sell-off, look for it to touch $420 and even $405 to test April low.

This week may be epic on the volatility since now FEAR (as shown in VIX) kicked in. We want to capture this opportunity to position for a long-term trade on the dip but also participating in the downside move. We want to focus on our FAANG’s stocks, the indexes and some earnings. Until then, have an EPIC week everyone. Namaste!!!