Heroic or not, the S&P 500 level is destined for a retest of casualties.  These are the levels to watch out for, says this strategist

Heroic or not, the S&P 500 level is destined for a retest of casualties. These are the levels to watch out for, says this strategist

In the words of the great Bonnie Tyler: “He has to be sure, and he has to be soon, and he has to be larger than life.” The hero this market is waiting for is Fed Chair Jerome Powell and he’s speaking on Friday, so it’s soon. Whether he is sure remains the question.

“Speculation is so hot ahead of your comments that it seems even subtle variations in intonation can make a difference for jittery markets,” notes Russ Mold, chief investment officer at AJ Bell.

Our call of the day Fairland Strategies founder and managing partner Katie Stockton is eyeing some bearish signs for the S&P 500, heroic or otherwise from the Fed.

It signals short-term oversold conditions in higher growth areas of the market that could help stocks bounce back in the coming days, especially in the event of well-received comments from the Fed. “We want to use these relief rallies, which we see as bear market relief rallies, as opportunities to reduce exposure to avoid the next drop,” she said in an interview with Real Vision on Wednesday.

Stockton went through some technical indicators she was watching. For example, she sees signs of a long-term downtrend in the S&P’s 200-day moving average, a popular short-term momentum gauge, which has recently switched to a sell signal.

Fairland Strategies

“Even if we saw the S&P 500 SPX,
+1.41%
inch above that 200-day moving average would not change for us. We say this because the long-term setup is still very challenging,” Stockton said.

She also notes that the years 2008 to 2009 and 2000 to 2002 “see retest after retest of this oversold territory,” which means fundraising for stocks will be a process, she cautions.

“I think the hope that there’s already some bottom in V is just that – hope – because that’s what we get used to during the corrective phases, but actually, we think this is something more than that,” Stockton said.

Stockton is eyeing a support level taken from a Fibonacci retracement level – horizontal lines that point to possible support and resistance – around 3,815.

“Now, if that level breaks, we feel that there is a really significant downside risk to around 3,200, which is the secondary Fibonacci retracement level. We don’t rule that out as part of this scenario. But 3815 is the main support in our work. And we hope it will be tested again,” said the strategist.

She said utilities and energy are all that’s left in the stock market in the long run. Her company recently launched the Fairlead Tactical Sector ETF TACK,
+0.33%,
that is exposed to these sectors, risky assets, short-term Treasuries, long-term Treasuries and gold – a very pessimistic position.

the markets

DJIA shares,
+0.98%

SPX,
+1.41%

COMP,
+1.67%
are higher, while the Treasury yields TMUBMUSD10Y,
3.080%

TMUBMUSD02Y,
3.384%
are plunging, and the DXY dollar,
-0.08%
is sloping south, which is raising GC00 gold,
-0.45%.
CL.1 oil,
+0.71%

BRN00,
+0.61%
it’s flat.

the hum

Results ahead of Dollar Tree DLTR,
-10.22%,
General Dollar DG,
-0.55%
and Great Greats,
+2.28%
can offer clues for the consumer to tighten their belts. Peloton PTON,
-18.32%
stocks plummeted after a disappointing outlook and lost more than $1 billion in the quarter.

Nvidia NVDA,
+4.01%
shares tumbled after a cautious view from the graphics chip maker. Here’s what analysts are saying. Also, here’s what the CFO tells MarketWatch about this difficult quarter.

CRM Salesforce,
-3.39%
is falling after the cloud software group pledged billions in buybacks but cut its forecast and missed guidance expectations. Snowflake SNOW Data Software Group,
+23.07%
is surfacing in better earnings news.

Tesla’s TSLA,
-0.35%
three-for-one stock split takes effect on Thursday. Stocks are up, but not everyone is excited.

GDP shrank by a revised 0.6% in the second quarter and jobless claims fell to a month low of 243,000. The Jackson Hole meeting starts on Thursday, but we’ll have to wait until Friday to hear from the Fed’s Powell.

China added another $146 billion in stimulus to its troubled economy, this time focusing on infrastructure.

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main quotes

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the graph

“Copper looks more bullish and could be the metal in favor for a more significant change later in the year,” says Mark Newton, Fundstrat’s head of technical strategy, in a note to clients.

A “significant lift from July lows despite economic data that was less than stellar” marks a technically bullish move that should take copper closer to 380-386 in the near term, the strategist said. “So after a small pullback in September, I expect a much more significant rally, which should test the spring 2022 highs.”

He likes to buy Freeport McMoRan FCX,
+6.10%
in late September declines as well as copper-themed ETFs.

fundstrat

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