Final week, there was a noticeable change in investor sentiment. We have now a lot knowledge popping out this week, and far will relaxation on how the buying and selling week ends. The S&P 500 index ($SPX) broke the uptrend, and on Tuesday, it closed on the 50-day easy shifting common (SMA).

Nonetheless, after the shut, Microsoft (MSFT) reported earnings. The inventory worth dropped over 30% in after-hours buying and selling. Though the inventory recovered a few of these losses, it is attainable that different shares which are reporting earnings this week—Amazon.com, Inc. (AMZN), Apple, Inc. (AAPL), and Meta Platforms, Inc. (META)—might add draw back strain within the subsequent few days.

Will Traders Purchase the Dip or Will There Be Extra promoting?

There is no telling how the market will react to the remainder of the massive tech earnings. However do not forget that along with these earnings there’s the Fed assembly on Wednesday and the July jobs report that can drop on Friday.

If buyers proceed to promote equities, the place will they make investments their money? For some time, the narrative was that there was rotation into small-cap shares. However the day by day chart of the iShares Russell 2000 ETF (IWM) under, the upside motion appears to be taking a breather.

CHART 1. ARE SMALL-CAP STOCKS SHOWING SIGNS OF EXHAUSTION? Whereas IWM is buying and selling above its 10-day exponential shifting common (EMA), the value motion within the final two days signifies extra promoting strain. Chart supply: StockChartsACP. For academic functions.

So, possibly the rotation is out of equities and right into a “flight to security” asset class, equivalent to treasured metals and bonds. This necessitates pulling up a chart of the SPDR Gold Shares ETF (GLD) and the iShares Silver Belief (SLV). You may see in each charts that there was a rally, however not essentially one with big momentum.

CHART 2. GOLD AND SILVER SAW SOME UPSIDE MOVEMENT. GLD traded above its 20-day SMA, however SLV nonetheless has some catching as much as do earlier than the value transfer might be declared an uptrend. Chart supply: StockChartsACP. For academic functions.So, if there isn’t any gold or silver rush, are buyers flocking to bonds? It is value wanting on the weekly chart of iShares 20+ 12 months Treasury Bond ETF (TLT). After a gentle downtrend, bond costs try to interrupt out of a downtrend. The downtrend line (blue dashed line) is damaged, TLT is buying and selling above its 10-week exponential shifting common (EMA), and it appears like a consolidation sample is forming. A transparent breakout above this consolidation might be a cause to present bonds some love. Bonds might make a giant transfer quickly.

CHART 3. ARE BONDS GETTING READY TO BREAK OUT? It is laborious to say, particularly forward of a FOMC assembly. Chart supply: StockChartsACP. For academic functions.

Wanting on the above charts, it seems that merchants are ready for the remainder of the week’s knowledge to be launched. Bear in mind, it is a weak seasonality interval, so it might be a while earlier than we will see a transparent directional transfer in any asset class. 

Volatility can be up. The Cboe Volatility Index ($VIX) is above 17, which is comparatively excessive after a protracted interval between 12 and 15.

Closing Place

Tomorrow, the world will hear from Fed Chairman Jerome Powell. The inventory market has priced in an rate of interest minimize in September. Will he trace at extra fee cuts this 12 months, or will he proceed to give attention to the state of the US economic system as he normally does? Keep tuned!

Disclaimer: This weblog is for academic functions solely and shouldn’t be construed as monetary recommendation. The concepts and methods ought to by no means be used with out first assessing your individual private and monetary scenario, or with out consulting a monetary skilled.