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Stocks fell sharply on Thursday with the carnage not sparing any of the major indices. We did see a modest late push higher to take the indices off the lows, but the damage was done and now many of those indices will be scrambling to hold onto some key support levels that are being tested now. Bonds rallied as yields fell sharply on some economic concerns. The dollar bounced back from Wednesday's sell off to cause some havoc in the I-fund and in some commodities.

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After the bell it didn't get a whole lot better as Intel was getting hit hard in after hours trading. Amazon was also falling. Apple did a little better but not enough to help the deluge of poor earnings and continues to come in, and the selling in the futures after the bell also continued.

Many of the charts have fallen to key support levels, and maybe we will see some buyers step up soon, but there has been a clear shift in sentiment, especially in the large caps, and the small caps that came into favor over the last several weeks, gave back a big chuck of their recent gains.

We came into August knowing it was one of the worst months of the year. There was an exception, however. Augusts have done quite well historically during election years. But there was a caveat to that as the month has done better when there was an incumbent president running, and of course that changes a week or two ago when President Biden bowed out of the race.

It happens, and August is just a volatile month historically. Very often there is a market peak in August or September. Last year it came near the start of the month. In 2022 it came mid-month, and in 2021 it didn't occur until September started.




And then there is the previous election year where the S&P 500 gained 7.2% in August of 2020 before falling back in September again.



There's obviously no guarantees, so now the question is whether the market can come back after a very poor start to August of 2024?

The Yield on the 10-year Treasury tanked with investors getting a little more concerned about the economy as the jobless claims numbers came in higher than expected yesterday. The lower yields aren't helping the market anymore because yields are no longer falling because of inflation improving, but rather because of economic concerns.



The dollar tanked on Wednesday but it did some backing and filling all the way back up to the breakdown area, which leaves it in an interesting spot. If it fails here it could help the stock market bounce back, but if Wednesday's breakdown turns out to be a big fake out, then there will be more headwinds for stocks, particularly the I-fund, which was down 2.65% yesterday.

The market leaders didn't fare much better but both the Dow Transportation Index and the Russell 2000 came down sharply to some potential support areas. The overnight selling in the futures doesn't bode well for these holding, but we do get the jobs report before the opening bell today and maybe, just maybe, it can save some of these charts from a breakdown.



The selling may be getting the Fed a little more itchy. They were late to the party when higher inflation started brewing a couple of years ago, and they had to rapidly raise interest rates. Now the market is clamoring for the Fed to cut rates before the economy suffers too much, and hopefully they won't be too late again.

The July jobs report estimates are looking for a gain of about 170,000 jobs and an unemployment rate of 4.1%. At this point it is almost expected that the labor market is starting to suffer so the market may be ready for a good news is good news reaction as the economic concerns has taken center stage to the rate cuts, which are basically a foregone conclusion at this point.

We know the buy and holders will do well if stocks rebound this month, and poor if they don't. Knowing whether this market has turned into a "sell the rallies" market or is still in a "buy the dips" mode, could separate the winners from the losers in August as far as the AutoTracker goes. Volatility does bring big opportunities if you play it right.

The July AutoTracker winners have been posted and what a month it was. Here are the winners and here are the monthly and annual (non-premium members) standings through July. Track your return on the AutoTracker - it's free!

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The S&P 500 (C-fund) got slammed again, giving back the recent rally off the July 25 lows. It filled that open gap up near 5550 and fell right back down again, which is not good action. There is still some support below that is getting tested now, and all the way down to the prior low and the bottom of that open gap, or even the 100-dy EMA near 5305. Unfortunately, that looks like a bear flag forming but I won't draw it in today as the chart is getting crowded. Basically, 5400 and change must hold or 5300 will like be next.




DWCPF (S-fund) blew a gasket yesterday and fell sharply. Yes, it had a failed bull flag breakout and a double top, but if the bulls want to look at this from a glass half full perspective, the bull flag (blue) is still intact, the 50-day EMA held at the lows yesterday, and the May peak resistance held as support again.




The EFA (I-fund) was slammed as well as the dollar's rebound from Wednesday's sell off erased Wednesday's gains in the EFA (I-fund) and then some. It closed above the 100-day EMA after a temporary intraday breakdown, and there is now a large open gap above that could eventually be a lure on any snap back rally.




BND (bonds / F-fund) blasted above the top of the rising trading channel as yields plummeted on economy concerns. Bond prices rise as yields fall, and that has been the trend for a few months now.




Thanks so much for reading! Have a great weekend!

Tom Crowley


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