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August 2024

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We had a sneak preview of emerging leadership on the morning of July 12th. That was the morning the June Core CPI came in well below expectations. The immediate rotation into several areas was quite evident and you can see it right here on this RRG Chart:

Financials (XLF), industrials (XLI), small caps (IWM), mid caps (MDY), and transports ($TRAN) were all poised to benefit from a change in Fed policy and the beginning of rate cuts. But Fed Chief Powell announced, and botched the announcement, in my opinion, with no rate cut and mentioning that a potential rate cut would be “on the table” for September. Now, I say “botched”, because the FOMC minutes came out two weeks later and the minutes suggested an upcoming rate cut was likely. “Likely” and “on the table” are not the same to me, but maybe others interpret it differently. Anyhow, that Fed announcement reversed the strength that we had seen in the groups mentioned earlier in July. Here’s how that RRG looked after the Fed announcement and leading up to Powell’s Jackson Hole address:

Does that not look like the exact opposite of what the market was looking at after the June CPI report was released?

Then comes the Jackson Hole speech on Friday, August 23rd, where Powell said, “it’s time for Fed policy to change”, or something to that effect. For 3 years, the Fed has been looking for proof that the decline in the annual Core CPI rate was “sustainable”. Did something happen between July 31st (Fed policy statement) and August 23rd (Jackson Hole speech) that suddenly made the Fed more comfortable of that sustainability? Was it the July CPI that showed inflation met expectations for that month? The only thing he’s proven to me, especially over the past 7 weeks or so is that the Fed changes directions more than a chameleon changes colors.

So now let’s use the RRG to track rotation once again, this time the 6 days since the Jackson Hole speech on August 23rd:

Here we go again! Now we’re beginning to see a repeat of what we saw in the middle of July as technology (XLK) and semiconductors ($DJUSSC) roll over on a relative basis, allowing the XLF, XLI, IWM, MDY, and $TRAN to lead the way.

Keep an eye on this rotation in upcoming days, weeks, and even months, because it’s exactly what I would expect to happen during a rate-cutting environment.

I look much deeper into this rotation, discussing the major indices, sectors, industry groups, and a few individual stocks in my Weekly Market Recap on YouTube, “Which Stocks Are Leading The Market”. Simply click on this link and enjoy!

Also, in my EB Digest newsletter on Monday, I’ll be featuring a now-leading stock that I believe could soar between now and year end. You can CLICK HERE to sign up for our FREE EB Digest newsletter and gain access to this stock on Monday!

Have a great long Labor Day weekend and Happy Trading!

Tom

Former President Donald Trump touted his relationship with North Korean dictator Kim Jong Un recently, calling friendly relations with the cloistered country a ‘good thing.’

Trump made the comment at a campaign rally in Pennsylvania this week, reflecting on what some see as among the greatest accomplishments of his administration.

‘I got along with Kim Jong-un of North Korea. Remember I walked over […] the first person to ever walk over from this country,’ the former president said to the crowd.

‘We also looked at his nuclear capability,’ he continued. ‘It’s very substantial […] You know, getting along is a good thing. It’s not a bad thing.

Trump became the first sitting US President to meet with a dictator of North Korea when he shook hands with Kim Jong Un in 2019.

The unexpected and historic summit came as a last-minute surprise to the U.S. public due to a public exchange of insulting messages between Trump and Kim Jong Un not long before they met up.

Trump has made the accomplishment a regular talking point since 2019, proudly boasting about his unique ability to reach the dictator and claiming he would have normalized relations by now if he had been re-elected.

‘It started off rough, remember that? I was saying ‘little rocket man’ and he was saying ‘I’ve got a red button on my desk, and I’m willing to use it,” Trump recalled in an April 2023 interview.  ‘And then all of a sudden we get a call — they want to meet. We would have had that whole situation straightened out shortly after the beginning of my second term.’

Democratic presidential nominee and Vice President Kamala Harris has attacked Trump for the meeting with Kim Jong Un, claiming the former president was too soft on the dictator.

‘I will never hesitate to take whatever action is necessary to defend our forces and our interests against Iran and Iran-backed terrorists. And I will not cozy up to tyrants and dictators like Kim Jong Un, who are rooting for Trump,’ she said during her acceptance speech at the Democratic National Convention. ‘Because they know he is easy to manipulate with flattery and favors. They know Trump won’t hold autocrats accountable — because he wants to be an autocrat,’ 

Neither presidential candidate has offered a thorough and concrete platform on how they would approach relations with North Korea following the 2024 election.

This post appeared first on FOX NEWS

The past sessions for the markets stayed quite trending; the headline index continued with its upmove. While extending their gains, the Nifty 50 Index ended the week on a very strong note. Witnessing a strong momentum on the upside, the markets expanded their trading range as well. The Nifty traded in a range of 393.65 points during the week and closed near its high point forming a fresh lifetime as well as a fresh closing high for itself. The volatility dropped a bit lower; the India Vix declined marginally by 1.18% to 13.39 on a weekly basis. While the markets rose in almost an unabated manner, the headline index posted a net weekly gain of 412.75 points (+1.66%). The month ended as well; Nifty posted a monthly gain of 284.75 points (+1.14%).

The markets are in a strong uptrend; however, once again it has created a situation wherein they have sharply deviated from their mean. This warrants a very careful approach towards the markets. The nearest 20-week MA is placed at 23.659 which is 1576 below the current close. The 50-week MA which is placed at 22104 is 3131 points below the current level. All these things point at the markets deviating from their mean once again; this leaves them prone to volatile profit-taking bouts once again at higher levels. This also highlights a need for vigilant protection of profits with every upmove that may take place as we travel with the trend.

Monday is likely to see a stable start to the day. The levels of 25400 and 25495 are likely to act as resistance points. The supports come in lower at 23900 and 23710 levels.

The weekly RSI is 75.03; it remains in a mildly overbought territory. The RSI shows a bearish divergence as it did not make a new high while the Nifty formed a fresh closing high. The weekly MACD stays bullish and remains above its signal line.

The pattern analysis of the weekly chart shows that the markets have taken out its immediate high of 25078; it is likely to continue trending higher while raising the support levels higher as well. Going by the derivatives data, the immediate short-term support has been dragged higher to 25000 levels; any violation of this point is likely to push the markets back into broad consolidation. The market breadth remains a concern; the breadth is not as strong as it should be otherwise if such strong trending moves are taking place.

All in all, there is nothing on the charts that suggests a correction in the markets. The ongoing uptrend is strong; the easiest thing one can do is to keep traveling the trend. However, at the same time, we should not disregard the fact that the markets are once again significantly deviated from their mean. It becomes all the more important that as we follow the trend, we do it very mindfully while guarding the profits vigilantly at higher levels. It would be prudent to keep actively trailing the stop-losses as that would help protect the bulk of the profits. The texture of the markets is a bit defensive; stocks from the PSE, Pharma, IT, FMCG, etc. are expected to do well. Overall, a selective and cautious approach is advised for the coming week.

Sector Analysis For The Coming Week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Relative Rotation Graphs (RRG) show a distinctly defensive setup. The Nifty Pharma Index had rolled inside the leading quadrant in the previous week. This week, the IT and FMCG groups have also rolled inside the leading quadrant. These groups along with the Nifty Midcap 100 which is seen losing relative momentum are by and large expected to relatively outperform the broader Nifty 500 Index.

The Nifty Consumption Index which is in the weakening quadrant is rolling back towards the leading quadrant. Besides this, the Nifty Auto, PSE, and Realty indices are also inside the weakening quadrant.

The Financial Services index has rolled inside the lagging quadrant. The Nifty Bank Index, Infrastructure, PSU Bank, Metal, Commodities, and Energy groups are inside the lagging quadrant. Among these, the Energy, Commodities, and Infrastructure indices are showing some improvement in their relative momentum.

The Nifty Media index is inside the improving quadrant; however, it is seen losing its momentum.

Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

On June 5, astronauts Butch Wilmore and Suni Williams went to the International Space Station for an eight-day visit. They now face an eight-month stay.

This debacle has brought long overdue attention to Boeing’s and NASA’s incompetence.

However, this failure also belongs to Vice President Kamala Harris. She is the Chair of the National Space Council. For her entire vice presidency, Harris has done the bare minimum required by law as chair of the council and has been totally uninvolved in the policy process. 

Former Pennsylvania Republican Congressman Bob Walker is a leader on space policy. As Chairman of the House Committee on Science, Space, and Technology, he drafted the original 1989 legislation that created the National Space Council.

The council’s purpose is to provide a White House level of leadership on space policy and activities. The importance of space for military, scientific, and commercial purposes has grown dramatically in the 67 years since the Soviet Union launched Sputnik and galvanized America to invest heavily in space.

The leader of the National Space Council has a major opportunity to develop America’s future in space. Vice President Harris has simply passed on that opportunity.

President Joe Biden clearly articulated the importance of Vice President Harris’s job as chairwoman in a Dec. 1, 2021, executive order.

‘The Chair shall serve as The President’s principal advisor on national space policy and strategy.’

So, the leader of the National Space Council has a major opportunity to develop America’s future in space. Vice President Harris has simply passed on that opportunity.

President Donald J. Trump and Vice President Mike Pence, the previous council chairman, had a shared vision that space was extraordinarily important to America’s future. Pence grew up as a space enthusiast. Before he was in public office, he would pack up his family and drive to Cape Canaveral to watch space launches. President Trump understood that Making America Great Again had to include a big investment in space. 

The Trump administration was further empowered by the development of reusable rockets. This was a concept we jointly pushed and funded the 1990s – only to have NASA fail to implement our appropriations. 

Fortunately, in 2010, Elon Musk developed a reusable rocket at SpaceX in the private sector. SpaceX has reduced the cost of launching satellites by an estimated 90 percent. The extraordinary success of reusable rockets allowed SpaceX to move from its basic Falcon rocket to the larger Falcon Heavy. It is now to developing its massive Starship, which will revolutionize space travel.

Vice President Pence aggressively pushed the National Space Council to develop a dynamic program for returning to the Moon and sending Americans to Mars. President Trump and Pence also pushed to implement and develop the U.S. Space Force. This was the first-ever focused military effort to secure space for national defense.

To really drive the system, Pence led the National Space Council with eight different meetings. He held people and institutions accountable to achieve real progress. By contrast, Harris has held one meeting a year – the legal minimum.

As a result of Vice President Harris’s lack of leadership, NASA has regressed back into bureaucratic timidity. Huge Boeing contracts have continued to absorb money – despite repeated failures and no tangible results. Boeing’s Starliner program was awarded a $4.5 billion contract and later given an additional $300 million. It is now so over budget that its fixed-priced contract will cost Boeing an additional $1.6 billion to complete.

Boeing appears to be too big to manage. It has problems in its commercial aviation, military aviation, and space divisions. Its management has overemphasized lobbyists to get money from Washington and underemphasized engineers to get work done. 

In 2019, NASA’s inspector general estimated that the Boeing Starliner would cost $90 million per usable seat and the SpaceX Dragon Crew would cost about $55 million per usable seat (various changes have raised the SpaceX cost to $65 million per seat – still $25 million less than Boeing).

In 2023, NASA’s inspector general estimated the enormous Boeing Space Launch System would cost $2.2 billion per launch. One scientific mission called the Europa Clipper was shifted from Boeing to SpaceX for $178 million. It saved $2 billion in launch costs compared to using the Boeing SLS, which is years past deadline and billions over budget.

Since Vice President Harris is pro-government bureaucracy and hostile to business in general, it is no wonder the lobbyist-focused and politically sophisticated Boeing system continues to survive despite its cost and failures.

Now the failure to implement aggressive oversight is coming back to haunt Vice President Harris. Just as she has failed to do her job at the US-Mexico border, she has failed to do her job as Chair of the National Space Council.

The next time you read about the astronauts stranded on the International Space Station, remember who left them there. 

They are Vice President Harris’s abandoned astronauts. If she had done her job and held Boeing accountable, they would be home.

Republican Bob Walker represented Pennsylvania’s 16th District in the U.S. House of Representatives from 1977 to 1997. While in Congress, he served as Chairman of the Science, Space and Technology Committee (then known as the Science Committee).

This post appeared first on FOX NEWS

Robert F. Kennedy Jr. believes former President Donald Trump has ‘changed’ as a person compared to his first administration.

Kennedy made the observation while appearing as a guest on an episode of the ‘All-In Podcast’ on Friday.

‘If President Trump wins […] people are going to see a very different President Trump than they did in the first term,’ Kennedy told the hosts about the former president. ‘I think he’s changed as a person, and I’ve known him for, you know, 30 years.’

‘I think he’s interested in his legacy now,’ Kennedy said at another point. ‘He wants to leave behind some accomplishments, and he wants to make our country better. And I think he’s, you know, he’s listening to a wider range of voices. He’s preparing to govern right now.’

Kennedy, who began the 2024 cycle running for president as a Democrat, then shifted to run as an Independent, suspended his campaign last week and endorsed Trump — a historic move for a member of the Democrat Kennedy family dynasty. 

Trump also appointed Kennedy to his transition team alongside fellow former Democratic lawmaker Tulsi Gabbard — a move to broaden his campaign’s coalition and appeal to non-GOP voters.

During the podcast interview this week, Kennedy was also asked if he ever sought or was offered the position of vice-president.

The independent candidate said he never had any interest in the number two slot, joking that it was the ‘worst job in Washington’ for someone like him.

‘I had no interest in being vice president, I grew up in politics — vice president is the worst job in Washington. You have no budget, you have no staff. Your budget actually all comes from the White House. So if you do something that offends the president, he can take away your plane, he can take away your staff,’ Kennedy told the podcast hosts. 

‘And the only thing you really have is the Naval Observatory, which is the official residence of the vice president. He can essentially put you on house arrest,’ the independent candidate continued. ‘And I have very strong views on issues and I felt like if I took that job I’d be on house arrest.’

Fox News Digital’s Brooke Singman contributed to this report.

This post appeared first on FOX NEWS

Vice President Kamala Harris sat down for her first media interview Thursday since ascending the Democratic presidential ticket, with some critics arguing the CNN interviewer should have taken a tougher approach similar to an interview just weeks before with former President Trump’s running mate.

CNN’s Dana Bash interviewed Harris and her running mate, Minnesota Gov. Tim Walz, for a total of roughly 26 pretaped minutes, which aired Thursday night. Harris was asked about inconsistencies in her political record, Trump’s personal attacks and what she would accomplish on day one in the Oval Office. 

Walz was asked about comments he made on the campaign trail related to his military service — that he once carried weapons in war, though he was never deployed to a war zone. 

Some critics say they wish Bash had pressed the pair in the way she grilled GOP vice presidential candidate JD Vance in a one-on-one interview just weeks before. 

‘Mixed marks for Bash, who pushed on some necessary subjects, but missed glaring follow-ups,’ Fox News contributor Guy Benson posted on X. 

More specifically, Vanessa Santos, president of Renegade PR, told Fox News Digital on Friday, ‘Dana was fired up when she grilled JD about his ‘cat lady’ comments. If she would’ve brought even half of that energy to the Harris-Walz interview, voters might have learned something last night.’ 

‘Instead, she let their nonsensical answers go unchecked and unchallenged,’ she said. 

Bash asked Walz during the interview, ‘You said that you carried weapons in war, but you have never actually deployed in a war zone. A campaign official said that you misspoke. Did you?’ 

Walz replied, ‘I’m incredibly proud. I’ve done 24 years of wearing the uniform of this country, equally proud of my service in a public-school classroom, whether it’s Congress or the governor. My record speaks for itself, but I think people are coming to get to know me. I speak like they do. I speak candidly. I wear my emotions on my sleeves. And I speak especially passionately about our children being shot in schools and around guns. So, I think people know me. They know who I am. They know where my heart is. And again, my record has been out there for over 40 years to speak for itself.’

‘And the idea that you said that you were in war, did you misspeak as the campaign has said?’ Bash pressed. 

‘Yeah. I said we were talking about, in this case, this was after a school shooting, the idea of carrying these weapons of war. And, my wife, the English teacher, she told me my grammar is not always correct,’ he said.

In contrast, during her interview earlier this month with Vance, Bash pressed the Ohio senator for roughly six minutes about his leading the charge on criticizing Walz’s characterization of his military record, challenging his criticisms three separate times during the segment. 

She also pressed him multiple times on his ‘childless cat ladies’ comments from an interview a few years ago. 

But critics argued that Bash didn’t ask the hard-hitting questions Americans wanted to hear during her interview of Harris and Walz on Thursday.

In one light exchange, Bash questioned Harris about a viral photo of Harris’ young niece watching her speech at the Democratic National Convention. 

‘You didn’t explicitly talk about gender or race in your speech. But it obviously means a lot to a lot of people. And that viral picture really says it. What does it mean to you?’ Bash asked.

Harris replied, ‘I am running because I believe that I am the best person to do this job at this moment for all Americans, regardless of race and gender. But I did see that photograph, and I was deeply touched by it.’

To which Bash followed up, ‘Did she talk to you about it afterwards?’

‘Oh, she had a lot to talk about. She had a lot. She listened to everything. And she listens to everything,’ Harris replied.

‘Did she give you your hot takes?’ Bash asked.

‘Oh, yeah, definitely,’ Harris said.

Michael Knowles, host of the conservative talk radio show ‘The Michael Knowles Show,’ commented, ‘Dana Bash only did a bad job if you consider her to be a serious journalist.’

‘In reality, her job was not to ask tough questions, as she did of JD Vance, but rather to allow Kamala Harris to check the box of having endured an uneventful interview,’ he told Fox News Digital. 

Link Lauren, a TikTok influencer and former senior campaign adviser for Robert F. Kennedy, Jr., told Fox News Digital, ‘It was as if Dana Bash was leading the witness.’ 

‘She would give options for Kamala to choose from — as if this was the SAT multiple-choice section,’ said Lauren. 

‘Bash is clearly capable of conducting a hardcore interview in the peak of a critical election cycle. It’s unfortunate she didn’t deploy those skills with Harris and Walz and instead put on kid gloves,’ said Santos. 

Santos added that Bash ‘allowing Walz to blame ‘bad grammar’ for lying about his military record seems like a politically motivated tactic, and is a disservice to Americans.’

Conversely, some critics say Bash leaned too far into ‘right-wing talking points’ and should have had a more original line of questioning with Harris and Walz.

Sami Sage, co-founder of Betches Media, posted on X, ‘the CNN interview summarized: Dana Bash: why did you [right wing talking point]? Harris/Walz: because [answer they’ve given 5+ times] Dana Bash: but is it because [right wing talking point]? have you changed your mind on [right wing talking point]?’

Democratic pollster and strategist Matt McDermott commented, ‘Kamala Harris and Tim Walz gave a perfectly thoughtful, insightful interview. But the press continues to be plagued by an inability to interview Democrats without the entire conversation being framed as, ‘What is your response to this false Republican talking point?’’

He added, ‘Framing an interview this way is an absolute disservice to viewers.’ 

Others heaped praise on Bash’s performance. Howard Kurtz, host of Media Buzz on Fox News, said, ‘Anchor Dana Bash did a fine job of pressing the vice president and following up–she does it in a low-key style.’ 

The New York Times said, ‘Dana Bash navigated a tough night adeptly,’ and went on to say, ‘in a setting arranged by the Harris campaign to appear friendly — just three people sitting together at a neighborhood coffee shop in Savannah — it was going to be difficult for Ms. Bash to extract much news out of the vice president. Still, the veteran journalist had a good night.’ 

This post appeared first on FOX NEWS

After Nvidia (NVDA) dropped after earnings this week, investors are once again reminded of the importance of the semiconductor space. I think of semis as a “bellwether” group, as strength in the VanEck Vectors Semiconductor ETF (SMH) usually means the broader equity space is doing quite well. Today, we’ll look at a potential topping pattern forming for the SMH, what levels would confirm a top for semiconductors, and what weakness in this key group could imply for our equity benchmarks.

Presenting the Dreaded Head-and-Shoulders Top Pattern

Ralph Edwards and John Magee, in their classic text Technical Analysis of Stock Trends, laid out the analytical process for defining a head-and-shoulders top. I’ve found that any price pattern like this consists of three important phases.

First, we have the “Setup” phase, where the price action begins to take on the appearance of a certain phase. This is when your brain tells you, “This is definitely a head and shoulders topping pattern.” In this case, we’re looking for a significant high surrounded by two lower highs, creating the appearance of a head and two shoulders.

We can clearly observe the setup phase on the chart of the SMH, with the June and July highs forming a somewhat nontraditional, but still valid, head. The lower peaks in March and August complete the picture. It’s worth noting here that, in each of those peaks, we can see a bearish engulfing pattern, serving as a wonderful reminder for longer-term position traders: ignore candle patterns at your own risk!

What Would Confirm This Topping Pattern for Semis?

But the setup phase only means there is a potential pattern forming here. Next we need the “trigger” phase, where the price completes the pattern by breaking through a key trigger level on the chart. For a head-and-shoulders top, that means a break below the neckline, formed by drawing a trendline connecting the swing lows between the head and two shoulders.

Using the bar chart above, that would suggest a neckline around $200, over $40 below Friday’s close. Another school of thought involves looking at closing prices only, for a cleaner perspective and more simple measurements.

Using closing prices, we get an upward-sloping neckline which currently sits just below the 200-day moving average around $215. In either case, until we break below neckline support, this is not a valid head-and-shoulders topping pattern. The third phase, which I call the “confirmation” phase, involves some sort of follow-through beyond the breakout level. This could mean another down close after the break, or perhaps a certain percentage threshold below that support level. And once all three phases are complete, then we have a valid topping pattern.

Gauging Potential Broad Market Impact

So let’s assume that semiconductors do indeed complete the topping pattern. What would that mean for the broader equity landscape?

As of Friday’s close, the SMH is up about 38.2% year-to-date. That compares to the S&P 500 (SPY) at +18.9%, the Nasdaq 100 (QQQ) with +16.2%, and the equal-weighted S&P 500 (RSP) at +12.1%. So semiconductors have certainly been a stronger leadership group in 2024. But what about since the July market peak?

Now we can see that, while the S&P 500 is almost back to its July peak, the Nasdaq is still 4% below that day’s close and semis are a full 11% below the market peak in July. And the equal-weighted S&P 500 is actually above its July peak already, speaking to the strength that we’ve observed in non-growth sectors off the early August low.

There is no doubt that semiconductors are looking a bit vulnerable after Nvidia’s earnings this week. But given the strength that we’re seeing outside of the semiconductor space over the last two months, weakness in the SMH does not necessarily mean weakness for stocks. Remember that it’s always a good time to own good charts!

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

In this StockCharts TV video, Mary Ellen reviews the broader markets, including NASDAQ weakness, and the outperformance in the equal-weighted S&P 500. She examines NVDA and shares how you should trade the stock depending on your investment horizon. Last up, Mary Ellen reveals top stocks in leadership areas.

This video originally premiered August 30, 2024. You can watch it on our dedicated page for Mary Ellen on StockCharts TV.

New videos from Mary Ellen premiere weekly on Fridays. You can view all previously recorded episodes at this link.

If you’re looking for stocks to invest in, be sure to check out the MEM Edge Report! This report gives you detailed information on the top sectors, industries and stocks so you can make informed investment decisions.

It’s a quiet end to August, with the broader stock market indexes wavering higher and lower. The Market Overview panel on the StockCharts Dashboard shows equity indexes closing higher. And yes, the Dow Jones Industrial Average ($INDU) closed at a record high.

FIGURE 1. MARKET OVERVIEW PANEL IN THE STOCKCHARTS DASHBOARD. All broader indexes were up on Friday.Image source: StockCharts.com. For educational purposes.

Stock Market Outlook

With August behind us, we now prepare for one of the worst months in the stock market. PCE data came out today, and it was pretty much in line with estimates. This means an interest rate cut in the next FOMC meeting is pretty likely. The Fed’s next meeting isn’t until September 18, and, given historical seasonality patterns, don’t expect too much upside in the first half of the month.

FIGURE 2. SEASONALITY CHART OF THE S&P 500 INDEX ($SPX). September is usually a weak month for large-cap stocks. Image source: StockCharts.com. For educational purposes.

The seasonality chart for the S&P 500 shows that August typically sees a 1% rise in the index. In 2024, the index’s performance was slightly higher, with a 2.28% rise. September looks dismal, but this is an election year, so things may turn out differently.

The S&P 500 has recovered from its August pullback, breaking a downtrend line (see chart below). Since then, the index has been trading sideways, refusing to reach its July 16 all-time high. Yet it’s trading above its 21-day exponential moving average, which is trending up.

FIGURE 3. DAILY CHART OF S&P 500 INDEX. The index is trading sideways, close to its all-time high. The Stochastic Oscillator indicates that momentum is slowing slightly.Chart source: StockCharts.com. For educational purposes.

The stochastic oscillator is displaying some slowdown in momentum, as the oscillator shows a slight decline amidst the relatively flat movement in the S&P 500.

More interesting is the S&P 500 Equal Weighted Index ($SPXEW), which hit all-time highs. The relative strength index (RSI) and moving average convergence/divergence (MACD) indicate there could be room to rally. This suggests that investors are rotating out of the mega-cap stocks and into smaller-cap ones.

FIGURE 4. WEEKLY CHART OF S&P 500 EQUAL-WEIGHTED INDEX. The index is at a new all-time high. The RSI and MACD indicate there’s room for more upside move.Chart source: StockCharts.com. For educational purposes.

This begs the question of how mid-cap stocks perform. The daily chart of the S&P 500 Mid Cap Index ($MID) shows that mid-caps are trading sideways, but the index is close to its all-time highs, which happen to be close to the upper end of the trading range.

FIGURE 5. S&P 500 MID-CAP INDEX ($MID). The index is trading sideways but is trading close to the top of the range. Market breadth is also expanding, favoring bulls.Chart source: StockCharts.com. For educational purposes.

Market breadth in the mid-caps looks to be broadening, with 73.25% of mid-cap stocks trading above their 50-day simple moving average. The advancers also outnumber the decliners.

You’ll likely find a similar situation with the S&P 600 Small Cap Index ($SML).

Stockchart Tip!

Click the above chart of $MID and change the symbol to $SML. Voila! You’ll get an updated chart specific to $SML.

So, which stocks in the mid and small-cap asset class should you focus on? This is when it helps to revert to the seasonality chart. Going through all the sector ETFs, Energy, and Utilities tend to be the leaders in September. Out of the two, the chart of Utilities Select Sector SPDR (XLU) shows a well-defined trend.

CHART 6. DAILY CHART OF XLU. Utilities have been in a sharp uptrend. The RSI and MACD indicate there’s room for more upside. Chart source: StockCharts.com. For educational purposes.

All moving averages overlaid on the chart are trending higher. The RSI and MACD also support the upward trend.

Closing Bell

So, while large-caps typically decline in September, it makes sense to consider investing a portion of your portfolio in mid and small-cap utility and energy stocks.

On Your Dashboard, click the Sector Summary link (bottom right of Sector Summary panel).Select One Month from the Period dropdown menu.Click Utilities Sector Fund in the Name column.Click the name of the top-performing Industry within the sector.Sort the columns by Universe (U column) by clicking the up and down arrows to the right of U.Scroll down to the mid-cap stocks and analyze away.

Enjoy your Labor Day weekend, and be ready for market action to resume on Tuesday.

End-of-Week Wrap-Up

S&P 500 closed up 0.24% for the week, at 5648.40, Dow Jones Industrial Average up 0.94% for the week at 41,563.08; Nasdaq Composite closed down 0.92% for the week at 17713.62$VIX down 5.42% for the week closing at 15Best performing sector for the week: FinancialsWorst performing sector for the week: TechnologyTop 5 Large Cap SCTR stocks: Insmed Inc. (INSM); FTAI Aviation Ltd. (FTAI); Carvana Co. (CVNA); SharkNinja, Inc. (SN); Tenet Healthcare Corp. (THC)

On the Radar Next Week

Aug ISM Manufacturing PMIAug S&P Global Services PMIAug ISM Services PMIAug Non Farm PayrollsFed Beige Book

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

It’s All Still Relative

The weekly Relative Rotation Graph, as it looks toward the close of this Friday (8/30) shows a clear picture — out of Technology, into everything else.

Simple enough, right? However, this is a relative comparison, so it only tells us whether a sector is in a relative up- or downtrend or whether its relative trend is improving or weakening. This means that when SPY starts to move lower, these sectors will likely outperform SPY, but their prices will still go down.

When just looking at the JdK RS-Ratio value as a gauge, there are only two sectors on the right-hand side of the graph with a reading above 100. These are Real Estate and Utilities. All other sectors are below 100 on the RS-Ratio scale and, therefore, technically still in a relative downtrend vs. SPY.

However, except for XLK, all these other sectors are on a positive RRG-Heading, between 0 and 90 degrees, which is a positive takeaway. There is still a risk that these tails may roll over while still inside the improving quadrant and continue their relative downtrend, but XLV, XLF, and XLP are looking especially strong, as they are getting close to crossing over into the leading quadrant.

XLY, XLI, XLB, and XLE are still too low on the RS-Ratio scale for consideration, imho.

SPY is Hitting Resistance

SPY pushing against resistance is creating an interesting situation. 565 is clearly a very important overhead resistance level for SPY. Only when this barrier can be convincingly broken will there be new upside potential for SPY to continue the longer-term uptrend. However, it is questionable whether SPY can break that barrier without the help of the technology sector. At the end of the day, that is now more than 30% of the total market capitalization of the S&P 500.

Over the last few weeks, SPY started to trade in a range between 555 and 565. When 555 gives way to the downside, significant downside risk will be unlocked, targeting the recent gap area between 545-548, followed by intermediate support around 537.5-540 and then 510, which is the level of the last major low.

Given the importance of the tech sectors in the current environment, I see the risk of a break below 555 as greater than the potential of a break above 565.

Semis / Tech Are Key

So, the tech sector, and especially the group semiconductors, will play an important role in the coming weeks to determine the faith direction of the general market.

This RRG shows the members of the Technology sector. The big elephant NVDA is clearly visible inside the weakening quadrant and rotating toward the lagging quadrant at a negative RRG-Heading.

The semiconductors and semiconductor equipment group is now the largest industry inside the technology sector, weighing more than 40%. NVDA itself is now the second-largest stock in the technology sector, with a weight of 20%. So when it moves, it moves, making the industry and the sector move.

NVDA is BIG, But Not the Only Semiconductor Stock

When I isolate the semiconductor stocks on the RRG, we see this image:

Most of these stocks are moving in the same direction as NVDA, on a negative RRG-Heading, weighing in on the industry and then on the sector. However, this is an extremely important group of stocks that deserves at least a minimal allocation in each portfolio “just in case it all turns around and starts to go up again.” From that perspective, it makes sense to look for alternatives as long as NVDA is rotating on a negative heading, digesting its recent gains and relative outperformance.

Searching for stocks on a positive RRG-Heading provides a few potentials.

Combining the positions on the RRG and looking at the individual charts. MPWR and TXN could be interesting alternatives if NVDA maintains its negative RRG-Heading.

#StayAlert and have a great weekend. –Julius