Stocks dropped last week after the Fed and the President each surprised investors, as I pointed out in the latest Market Week show. As a result, the S&P 500 sank 94 points last week to 2932, a decline of 3.1%.
While Fed Chair Jerome Powell cut interest rates by a quarter point, he also quashed hopes for further cuts when he explained, “We’re thinking of it essentially as a midcycle adjustment,” rather than the “beginning of a lengthy cutting cycle.”
On the next day, President Trump announced new import tariffs via Twitter, “The US will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country.”
These factors caught investors leaning too bullishly in the stock market, and as such, strong selling ensued.
Our approach to technical analysis uses market cycles to project price action. The first thing to note on the chart below is that it broke the low from which is started the cycle, which is a bearish indicator.
S&P 500 (SPX) Daily Chart
Our projection is for the SPX to attempt a rebound early this week and fail in the resistance zone between 2757-2972. After that, we expect stocks to continue to roll over, within the context of the intermediate market cycle beginning a topping process
Let’s also take a look at Fluor Corporation (NYSE:FLR), which lost nearly a quarter of its value after reporting a loss per share of -$3.96 and total revenue of $4.1 billion, compared to analyst estimates of $0.50 and $4.7 billion. CEO Carlos Hernandez explained that the company started, “a comprehensive operational and strategic review.”
Fluor Corporation (FLR) Stock Weekly Chart
Based on its market cycles, we can see that FLR has also broken its cycle low, which is the third consecutive cycle in which this has occurred. We see continued downside risk for the remainder of this cycle, with a projection of below $20.
For a more detailed analysis of both of these charts, check out the latest episode of the askSlim Market Week show.