Before the Bell Aug 9

Tickers discussed: SPY QQQ IWM FB AAPL TSLA MSFT  AMZN  GOOGL NFLX $TNX TLT EEM SMH

Before the Bell  is premarket prep for active traders. The note provides detailed stock market technical analysis focused on the indexes and FAAMGs. Key levels and trading locations are provided, along with trading plans and timely commentary to keep you on the right side of the trade.

Earnings 

Companion Video 

The video is a detailed technical review of the indexes and FATMAAN names. All the key trading levels are identified along with commentary and trade plans for each ticker. Trade ideas are also discussed.  Run the video at 1.25x to reduce run time.

Find the Video HERE

Macro Data Releases Week of Aug 9

  • Monday – JOLTs,  Bostic / Barkin FOMC speakers
  • Tuesday – NFIB Optimism Index, Productivity & Costs,  FOMC Evans
  • Wednesday – CPI, Atlanta FED inflation expectations, Oil inventories at 10.30, 10 year bond auction, FOMC Evans
  • Thursday – PPI,  Jobless Claims,  NatGas inventories, 30yr bond auction,
  • Friday – UM Consumer Sentiment, Import / Export Prices. 

It’s about Rates and Rotation

The market is still trying to digest the strong jobs print on Friday. On Friday we saw rates break the downtrend channel and make a run back toward 1.3% and the $USD tick higher. The stronger $USD whacked gold and the commodities complex.  The steady drumbeat of covid fears probably is also weighing on the demand picture. Overnight China printed a 9% PPI inflation number which sent a shock wave through markets stoking fears that the inflation picture is worsening, not abating as the FOMC suggests.  The low liquidity environment is not helping either. Gold saw a 4% flash crash.

Going forward we need to be hyper focused on the trajectory of rates and the USD.  A strengthening USD, driven by rising rates, has the potential to not only be an EEM wrecking ball, but to take a bite out of the commodity complex. Also a rising rate environment should be a difficult headwind for bubble / high-valuation names.  Stay focused on the sector rotation themes we’ve been discussing. The key is getting it right, not being first. There have been a bunch of head fakes. 

10 year Bond Yield

TLT

Friday’s rate spike triggered a sell signal on TLT.  That said, the convergence of the 50 & 200ema are just below and could provide support.  This sell signal has me leaning toward a rotation into cyclicals, value, trade.

Potential $USD wrecking ball in $EEM

A rising US Dollar is generally a headwind / bearish factor for emerging markets….especially those that carry large amounts of $USD denominated debt. From the chart, you can see price testing key support along with the 200ema at $51.50. A break below opens up a small move to minor support at $50 , but a break there opens the door to $47.  Worth a few alarms.  Take note that $EEM has recently been reconstituted to include a significant percentage of Chinese equities. Before you pull the trigger on a potential trade, make sure you understand what EEM is giving you exposure to.

Signs of a Shift to Cyclicals

Rising Rate Environment Areas of Interest.

  • Falling Dollar is supportive of Commodities and cyclicals in general.
  • Rising Rates ( $TNX ) and / or a break of TLT $148
  • Cyclically focuses ETF’s to watch.:  XLB, XLE, XLF, XLI, KRE, IWM
    • Set alarms on the above EFTs for further confirmation of the move.
    • Traders can then drill down in specific sectors for invididual names if desired
  • Materials.  Commodity and Specialty Chemicals
  • Metals and Mining.  Copper, Aluminum, Steel, XME
  • Industrials. HON / MMM / GE  Infrastructure names
  • JETS / Airlines, Delivery services , marine transport, etc
  • KRE; Regional Banks…………more highly levered to rates than mega banks
  • Travels, Hotels, Cruise Lines re-opening names.

INDEX CHARTS

A detailed walk-through of the levels and trading strategy for the indexes is given in the video ( link above) . The static charts are provided for reference. The FATMAAN names are also reviewed in the video along with trade ideas and other charts of interest.

SPY 2 Hour

SPY 30 Min

QQQ 2 hour

QQQ 30 min

IWM 2 hour

IWM 30 min

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