SPX had a fairly quiet week staying within its expected move even with Fridays break to new highs, although Nasdaq being weaker Friday on the back of strong jobs report boosting bond yields. This is going to be key to watch this week if interest rates start climbing back above 1.3% and spooks growth stocks more or if its just a short term move that quiets down ahead of the more important Jackson Hole Econ meeting the last week of August. While last week’s move to new highs wasn’t super powerful with a big thrust as I would have expected towards 4450, it still closed at new all time highs so need to respect the trend that is. This week’s expected move is +/- 65 SPX points based on the weekly options pricing. That would take it to 4500 roughly on a up move. While the downside would potentially find support near the 21 ema at 4375. Its the week prior to August monthly options expiration so wouldn’t be surprising to see some late week pullback which is typical. Friday also saw a key break lower in volatility markets with the VIX closing under 17 for the first time in about a month. This should be a clue that stocks may grind higher into expiration week, after that may be a time to be more cautious and expect higher volatility ahead of the Jackson Hole meeting. Over the years while I have traded I can remember several late August selloffs that came out of nowhere. Its just a time to be less exposed directionally and focus on more neutral premium selling if anything.
TNX 10 year yields. Poking above 21 ema but still in solid downtrend since Spring
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 above zero and RSI is 62, although both are lower than they were the last time SPX made new highs in July. Bearish divergence.
Cumulative Breadth Advance/Decline added some strength last week but still below new highs slightly. NYSI Summation index trying to curl higher and cross above the 8 day MA. Also the Nasdaq version NASI trying to cross positive as well. New 52 week highs ticked up a bit last week as NYSE had 183 new highs on Friday and the 20 day average is 138. There were 35 new 52 week lows.
SENTIMENT- AAII Investor sentiment survey Bullish sentiment stayed low at 36.1% Bulls from 36.2% last week. Bears up to 31.7% from 24.1% last week. Bulls/bears ratio at 1.14.
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%.
S&P SPY Sector Glance:
9 of 11 SPY sectors are in strong bullish short term trends as shown below. Basic Materials also close to confirming strong bull trend which just leaves Energy as the laggard in a downtrend. Transports also continue their downtrend which may be a longer term issue into end of year for broad market. Overall Financials led the strength this week up +3.7% with SPX closed up +0.94% for the week.
SEASONALITY ODDS:
Second week of August is a bit weaker midweek until around the Friday before options expiration week which then shows good potential for bullish bias into OPEX week. Nasdaq has tended to be strongest during August opex week. Remember these are just tendencies and I 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.
Apple (AAPL)
AAPL continues to consolidate nicely post earnings above its 21 ema. Inside week candle last week with a small range under 3 pts. A break above 148 can trigger a move to 151-152 new highs. A close under 145 and this setup is invalid. Buying the 147/150 call spread for Aug is a easy way to risk 1 to make 2 on the upside.
Bull Put Spread Trade of the Week:
Twitter (TWTR)
Sell the October 67.5/62.5 put spread for 2.00 or better.
TWTR has been spinning sideways to lower since earnings and the rising 50 day MA below at 65.50 should be supportive going forward. The daily chart is forming a squeeze which usually resolves higher when the trend is above the 50/200 day MA’s.
Individual Stock Scans of note: sorted by market cap
Weekly inside candles: AAPL, MSFT, GOOGL, PG, INTC, CVX, TMUS, UPS, UNP, BA, SNAP, MMM, CAT, PDD, WDAY, BIDU, TWTR, VRTX, SPOT, PLTR, CTSH, NET, MT, VFC, SWKS, VLO, WY, TDOC, IP, FUTU, PHM, CTXS, CLF, MOS, TECK, QS, X, SPWR, SAVA, FUBO, STEM, BLNK
8/21 EMA Daily Bull Cross: JPM, C, BP, PNC, WDAY, MET, MNST, MOS, SEAS
8/21 EMA Daily Bear Cross: ANTM, MO, NIO, BDX, PTON, SWKS, RVLV
Stocks compressing in TTM Squeezes within 10% of 52 week highs: AAPL, JPM, UNH, CMCSA, ORCL, ABBV, AVGO, TXN, HON, BMY, UNP, AXP, AMT, GE, MMM, MO, GILD, USB, TJX, PNC, CME, COF, PBR, ITW, REGN, CRWD, ROST, AIG, EA, DFS, PANW, SWKS, SYF, KMX, TSCO
55 day Highs with strong closes: MSFT, ADBE, DHR, ABT, ACN, WFC, MS, NEE, GS, BAM, ADP, CB, ADSK, EW, DG, A, BCE, PAYX, YUM, KKR, XP, ALB, TXT, ACGL, IPG, VOYA, NAVI, LTHM