Stocks rallied early on Thursday despite the selling in Nvidia, but by the close the bears made their presence known and the large caps closed mixed.  The Dow gained 244-points, but the Nasdaq closed lower, and the S&P 500 was flat.  Small caps and the I-fund both held onto solid gains.  The PCE inflation data report comes out before today's opening bell, and it could be another market mover.

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I don't know if the market is looking for strong economic data, or weak heading into this month's FOMC Fed meeting and likely rate cut, but we saw better than expected jobless claims yesterday, as well as a better than expected GDP number for Q2, and of course the latter is rear-view mirror data, but is shows that there are still no signs of a recession.  However, is it getting too strong for the Fed to cut, or is today's PCE inflation report more important to the rate cut story?

I posted the chart yesterday showing the PCE data coming way down since the peak a couple of years ago, but there was an uptick in the most recent report.  If inflation does show its ugly head again, it could effect rates and the market may throw a tantrum.  Low inflation data would be ideal so we are in another situation where we want strong economic data, but maybe not too strong.

The 10-year Treasury Yield and the dollar were up on yesterday's economic data, both of which have been due for some relief while mired in downtrends.
 
    


Of course yesterday was about Nvidia, and despite some big numbers coming from the chip giant, expectation were too high to beat and the stock sold off.  The surprise in the morning was the big rally in stocks despite this leader selling off.  That morning rally eventually faded and Nvidia's chart is on the brink of more downside if the 50-day EMA fails to hold.

     

Both Nvidia and the Semiconductor Index ETF chart had potential bulls flags forming, and while the SMH is still in the bull flag, it will need Nvidia to hold up to keep it from failing here at its 100-day average (orange line).  And if semiconductors fail, be careful in the other indices.

Back to seasonality and after the morning rally yesterday I was looking at the August chart and the 30 year record on the 29th of the month saying, "of course."  But then the rally failed later in the afternoon so perhaps others saw this chart / data and wanted to front run the 30th's poor record, so we got the sell off into the close?  Weird.


      
                      Chart provided courtesy of www.sentimentrader.com

OK, get ready for the today's key inflation indication, the PCE Prices report - the one the Fed has come to rely on.  This may sound cynical but the closer we get to the election, it might be less likely that we get any surprises.  The Fed is already concerned about the appearance of cutting rates this close to the election, and they probability don't want any surprised to change the September rate cut plan that everyone is expecting.  But, we'll see.

From tsp.gov: Holiday Closing - Some financial markets will be closed on Monday, September 2, in observance of Labor Day. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (September 2) will be processed Tuesday night (September 3) at Tuesday's closing share prices.

Administrative Note:  It's time for the 2024 NFL Survivor Contest again. It's a very easy contest to do - just pick one winning team every week and you move on to the next week.  As always, it's free and there are prizes awarded to the last survivors.  The deadline to register and make your week one pick is the start of the first game Sunday Sep 8.  More information. 
 

The S&P 500 (C-fund) had another negative reversal day yesterday despite closing flat.  It's not the dreaded negative outside reversal day (NOR) like we saw last week, but it's still a bearish formation for the short-term.  By the way, the NOR is still in play despite the S&P 500 being up since that reversal day.  This has a bull flag look to it like the SMH semiconductor chart above, so as goes one, the other will likely follow, and Nvidia did break below its bull flag so that's a bit of a warning sign if Nvidia doesn't bounce back soon.

        


The DWCPF (S-fund) had a very solid day yesterday as investors may have backed off big tech, but they weren't selling the small caps aggressively.  They were selling late as the index closed well off it highs, but it held onto those gains and that's something.  I still think we could see that right shoulder get filled in on that inverted head and shoulder pattern before it attempts to break out, and the open gap at 2040 is always a potential target, but there's no rule saying it has to.

       
 

The EFA (I-fund) also held onto some gains but the fact that the selling in US stocks was after the overseas markets had already closed could mean there may be some give backs today.  This chart is also touching some overhead resistance.

BND (F-fund) pulled back again as yields inched higher, but from a technical analysis standpoint, it could be a consolidation and a cup and handle formation, which tends to eventually break to the upside.  Today's PCE may make or break that analysis.

Thanks so much for reading!  Have a great holiday weekend!



Tom Crowley


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