The SPX had a volatile options expiration week as has been the trend this year. Pulling back about 100 SPX points into a Thursday gap down which found support near 4375 and recovered back above the key 4400-4420 zone. The should be a key downside level going forward still as it likely forces market makers to sell in order to hedge below that zone. If the SPX can stay above the 8/21 EMA’s it can retest highs and potential for that 4500 still. However with momentum declining on both the weekly and daily charts shown and breadth still suspect and bearish its still a market that needs to prove itself for sustained upside moves to hold. This week the big Jackson Hole Fed meeting starts Thursday so clearly a week with a lot of potential risk of volatility, both upside and downside. While the SPX is holding firm above that key 4400 most of August thus far, the small caps IWM continue to weaken, closing below the 21 week EMA. The Nasdaq tech index QQQ likely holds the key to where markets want to go into September so should be watched closely. As usual the VIX has been a good clue day to day to watch for any concerns on the shorter timeframe. It quickly got above its upper bollinger band last week and was short term extended helping the SPY bounce back. If VIX creeps back above 20 it will be a red flag for volatility increasing again. Some names reporting earnings this week include CRM, INTU, SNOW, PTON, BBY, PANW, WDAY, HPQ, DELL, ADSK.
3 PEAKS MARKET SIGNALS OVERVIEW:
TREND- The short and long term trend of the market being bullish biased increases the odds of pullbacks being good buy opportunities.
SPX Short term trend of the 8/13/21 EMA’s = Strong bullish trend
SPX Long term trend of the 21/55/89 EMA’s = Strong bullish and EMA’s stacked positive.
CONDITION/BREADTH- SPX MACD Momentum is below zero and RSI is 57, still below previous highs and showing bearish divergences.
Cumulative Breadth Advance/Decline line declined last week overall even with small positive breadth on Friday. Breadth staying weak. NYSI Summation index bearish cross back below the 8 day MA is sign for caution. New 52 week highs on NYSE had just 79 new highs on Friday and the 20 day average is 143. There were 96 new 52 week lows, which has slowly been increasing, unusual to see with the market at new highs and a bearish sign.
SENTIMENT- AAII Investor sentiment survey Bullish sentiment fell to 33.2% Bulls from 37.0% last week. Bears ticked up to 35.1% from 31.5% last week. Bulls/bears ratio at 0.95.
Sentiment data is looked at as contrarian and Bullish signals occur when Bulls drop under 35%, or when Bears rise above 50%. Bearish signals occur when Bulls exceed 55% or if Bears drop under 20%.
NYSE cumulative breadth struggling
S&P SPY Sector Glance:
8 of 11 S&P sectors are in strong bullish short term trends as shown below. Some decent weakness in Discretionary and Industrials last week pushed them into short term bearish trends. XLY being a fairly large weighting makes it notable. The highest weighted sectors ( Tech, Healthcare) staying strong. Overall Utilities and Healthcare the strongest sectors this week up +1.8% each. Energy -7% and Materials -3% the weakest. SPX down -0.59% for the week.
SEASONALITY ODDS:
The week after August options expiration shows potential weakness to start the week then somewhat stronger by end of week. Its been a fairly choppy month overall and now headed into month end it may continue as seasonality is mixed between each index. A decent chance for history to repeat with one day up, next day down, type of pattern to play out.
Seasonality odds are just tendencies based on historical patterns but always let price action confirm any trade setups.
Inside week bullish setup: Stocks that stayed within the high and low of its prior week. A break above these highs could trigger larger moves for fresh opportunities.
Datadog (DDOG)
DDOG has been in a strong uptrend and gapped up post earnings while the Software sector stays strong as well. The stock formed an inside week candle last week and in a strong market likely takes out the highs above 137 and continues higher. For momentum need to wait for 137 trigger, conversely can always try a bounce trade off the rising 21 EMA if that happens first. October calls slightly in the money would be a good potential trade to watch.
Bull Put Spread Trade of the Week:
Trade Desk (TTD)
Sell the October 77/72 put spread for 2.25 or better.
TTD is pulling back to its 50 and 200 day MA’s while it filled a gap into 75. Would expect the 200 day MA to hold as support in the coming weeks as it continues making higher lows the last several months. This could easily retest its highs of 90 in a strong market or at least stay above the 75-77 level for this bull put spread to work.
Individual Stock Scans of note: Sorted by Market Cap
Weekly inside candles: BAC, UNP, MU, CSX, COF, ATVI, MET, WBA, DDOG, CTSH, SYY, CNC, NUE, TSN, DLTR, WPM, NVAX, SAVA
8/21 EMA Daily Bull Cross: NVDA, JWN, SIG
8/21 EMA Daily Bear Cross: HON, ABNB, PNC, MPC, NTR, NTAP
Stocks compressing in TTM Squeezes within 10% of 52 week highs: AAPL, GOOGL, NVDA, HD, CMCSA, KO, AVGO, HON, BMY, INTU, NOW, MO, BX, HCA, VMW, ADI, GD, MRVL, ROST, NET, HSY, ZS, LEN, YNDX, IP, DISH, DKS, THC, CSTM
55 day Highs with strong closes: MSFT, NVDA, JNJ, UNH, CMCSA, CSCO, ACN, COST, NEE, LIN, BMY, LOW, AMT, INFY, PLD, TJX, CB, MMC, EW, ADSK, SO, D, WM, AMX, JCI, EXC, AEP, APH, CDNS, RSG, KR, BLL, WEC, DTE, ETR, PPL, EIX, ROL, CMS, NUAN, BRO, EVRG, LNT, CCK, NYT, BJ, ALKS, OPCH