Fed heroics or not, the S&P 500 level is destined for a repeat of the lows. These are the levels to watch, says this strategist

In the words of the great Bonnie Tyler: “He has to be sure, and he has to be soon, and he has to be larger than life.” The hero this market is clamoring for is Fed Chairman Jerome Powell, and he’s speaking on Friday, so that’s coming soon. Whether he is confident remains the question.

“Speculation is so intense ahead of his comments that it seems even subtle variations in tone could make a difference in choppy markets,” notes AJ Bell chief investment officer Russ Mould.

Us call of the day by Fairland Strategies founder and managing partner Katie Stockton has her eyes on some bearish signs for the S&P 500, Fed hero or not.

It points to near-term oversold conditions in higher market growth areas that could help stocks recover in the coming days, especially in the event of well-received Fed comments. “We want to use these relief rallies, which we see as bear market relief rallies, as opportunities to reduce exposure to avoid the next drop,” she told Real Vision in an interview on Wednesday.

Stockton went through some technical indicators she was watching. For example, he sees signs of a long-term downtrend in the S&P’s 200-day moving average, a popular short-term momentum gauge, which turned into a sell signal recently.

Fairland Strategies

“Even if we were looking at the S&P 500 SPX,
+1.41%
inch above that 200 day moving average, it wouldn’t change for us. We say that because long-term regulation is really, really hard,” Stockton said.

He also notes that the years 2008 to 2009 and 2000 to 2002 “saw retests after retests of this oversold territory,” meaning the bottom for stocks will be a process, he warns.

“I think the hope that there’s already some V bottom is really just that — hope — because that’s what we’ve been used to during the corrective phases, but really, we think it’s more than that,” Stockton said.

Stockton is eyeing a support level taken from a Fibonacci retracement level — horizontal lines that show potential support and resistance — around 3,815.

“Now, if that level is broken, then we think there’s really significant downside risk to around 3,200, which is the minor Fibonacci retracement level. We won’t rule it out as part of this scenario. But 3815 is the main support in our work. And we expect it will be reviewed eventually,” the general said.

He said utilities and energy are all that’s left in the stock market long term. Her company recently launched the Fairlead Tactical Sector ETF TACK,
+0.33%,
which is exposed to these sectors, risk assets, short-term bonds, long-term bonds and gold — a very bearish position.

The markets

DJIA Stocks,
+0.98%

SPX,
+1.41%

comp,
+1.67%
are higher, while Treasury yields TMUBMUSD10Y,
3.087%

TMUBMUSD02Y,
3.392%
the DXY dollar also sinks,
-0.16%
leans south, which raises gold GC00,
-0.56%.
Oil CL.1,
+1.11%

BRN00,
+1.18%
it is flat.

The hum

Results ahead of Dollar Tree DLTR,
-10.22%,
Dollar General DG,
-0.55%
and Big Lots BIG,
+2.28%
may provide clues to consumer belt-tightening. Peloton PTON,
-18.32%
Shares tumbled after a disappointing outlook and lost more than $1 billion in the quarter.

Nvidia NVDA,
+4.01%
Shares fell after a cautious outlook from the graphics chip maker. Here’s what the analysts are saying. Also, here’s what the CFO tells MarketWatch about that tough quarter.

Salesforce CRM,
-3.39%
falls after the cloud software group promised billions in acquisitions but cut its forecast and missed guidance expectations. Snowflake Data Software Team SNOW,
+23.07%
uploads better earnings news.

Tesla’s TSLA,
-0.35%
The three-for-one stock split takes effect Thursday. Stocks are rising, but not everyone is thrilled.

GDP contracted a revised 0.6% in the second quarter and jobless claims fell to a one-month low of 243,000. The Jackson Hole meeting starts on Thursday, but we’ll have to wait until Friday to hear from the Fed’s Powell.

China added another $146 billion in stimulus to its troubled economy, this time zeroing in on infrastructure.

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The chart

“Copper looks more bullish and may be the metal to favor for a more substantial move at the end of the year,” Mark Newton, chief technical strategist at Fundstrat, said in a note to clients.

A “substantial rise from July lows despite less-than-stellar economic data” signals a technically bullish move that will take copper near 380-386 in the near-term, the strategist said. “Then, after a small retreat in September, I expect a much more substantial rally to test the 2022 spring highs.”

He likes to buy Freeport McMoRan FCX,
+6.10%
in dips at the end of September as well as copper-themed ETFs.

Fundstrat

Random readings

Don’t knock it — wedding cake from Walmart.

A tourist has been arrested after taking a moped cruise through the ruins of ancient Pompeii.

“Magic mushrooms” at the forefront of alcoholism.

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