Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

How Did The Market Perform In August?

Published 09/02/2020, 12:02 AM
Updated 07/09/2023, 06:31 AM

In early August I wrote about 3 major market themes that I expected would continue to emerge or completely reverse.

GLD - TLT Daily Chart

First was the focus on the junk bonds (NYSE:JNK) and investment grade bonds (NYSE:LQD).

Junk bonds have remained strong indicating the appetite for high risk companies has not waned-good, news for the market.

LQD or investment grade bonds sold off into a warning phase. However, on a weekly chart, it held just where it needed to at 134.54-the area of support for now.

Second was the focus on the banking and financial sectors of the market.

Although those sectors saw a brief pop, XLF (NYSE:XLF) and KRE (NYSE:KRE) are pretty much exactly at the prices they were when I left.

What does that mean?

Most likely, these areas reflect the reality of the economy and how many loan defaults and bankruptcies continue to plague real economic growth.

Third was the dollar, low rates, rising metals, up move in sugar and all the factors that still support a stagflation theory.

Is that still in play?

No doubt the recent rally to new highs in the S&P 500 (NYSE:SPY) and Nasdaq (NASDAQ:QQQ) is impressive.

However, this market remains divided, with stocks skyrocketing or languishing and not much in between.

The Economic Modern Family is equally mixed with the Russell 2000 (NYSE:IWM) and Russell 3000 (NYSE:IWV) trading sideways. Regional Banks (NYSE:KRE) stuck near the bottom of the range and Semiconductors (NYSE:SMH) are flying.

Here is where we see the stagnation part of the stagflation theory.

To date, grains (wheat and soybeans), which I have pointed out repeatedly as trading at 100-year lows versus the SPY, have rallied well.

Gold has held its gains although has yet to convincingly clear $2000 an ounce.

Rates have firmed a bit while the dollar continues to freefall. Only yesterday, the dollar found some footing, which could take it to test overhead resistance.

Sugar, my secret sauce for stagflation, edged higher. Above both the 50 and 200-DMAs, provided cash holds above 12.25, sugar can continue to tell us more about rising food costs amid supply chain disruptions.

I am still watching commodities, particularly gold and silver.

And now, with civil unrest a daily headline globally as well in the US, the market, which is very one-sided towards tech, could be close to overdone.

For that, volatility is a key to keep eyes on.

After a reversal bottoming pattern on August 26 confirmed, even while NASDAQ runs, a move in VIX (the fear index), over the 50-DMA (Recuperation Phase) where it hovers now, could mean trouble.

S&P 500 Low Volume Rally to new Highs (348 Support 345 Key)

Russell 2000 Sideways price action (153 Support 157 Resistance Key 160.

Dow Still has gap to fill at 288.75  (282 Key support.)

Nasdaq 300 psychological resistance (288 key support.)

KRE (Regional Banks) 38 key support 40 resistance.

SMH (Semiconductors) 173 key support

IYT (Transportation) Has ability to take lead if hold 197

IBB (Biotechnology) Trading range 130-137

XRT (Retail) 50.00 key support

Volatility Index (VXX) Index confirms recuperation phase ( On Radar)

Junk Bonds (JNK) 105 support

LQD (iShs iBoxx High yield Bonds) 134.55 key support

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.