Attack the Week (ATW)

August 11, 2024

Sunday Thoughts

After quite a historic week in markets, I laid my investing mind to rest for a few hours while I enjoyed a tremendous family BBQ. Reflecting on what emerged last week caught me in one area and principle that I think is important to navigate any macro currents, namely keeping a flexible mind. Strong opinions loosely held are important credentials to avoid getting stuck in either stale or consensus thinking. Could I have missed something? As investors, we believe that the unfolding market volatility automatically transcends into the real macro world. That link, however, is inexistent unless there is a more pronounced and sharp financial market deterioration. Extrapolation, therefore, is potentially dangerous.

As I look at the SPX weekly chart, I see a large but green candle, which tagged the 50 ema support but did not break below it. On a weekly basis, our momentum model suggests a long still.

Turning perspectives to longer-term timeframes, the monthly timeframe is pointing out an ominous nine count, indicating a reversal of the prior trend. This, however, should not be looked at in isolation as momentum, as for the weekly charts, is still positive.

Is there a possibility that we have been all fooled once again? While I was adamant that markets overshot the Fed’s December pivot, this time around, we are just a few weeks away from the first rate cut. But is the extent of the cutting cycle pricing justified? How fragile is it? Could we look back in a month's time and postulate that the panic was a great opportunity to fade pricing? Everything is possible.

The Dallas Fed’s nowcast is still looking good and even accelerating.

Source: Bloomberg

I will ponder these questions and look for potential more positive trades in the charts further below.

Let’s now read Macro D’s thoughts and explore next week’s calendar and some of the most compelling chart setups as we go into another trading week.

Let’s go!