9% In 9 Days

Monday Market Update - August 19, 2024

The Markets

Wow! A lot has happened since our last market update.

On August 5, the day the market bottomed, we were Assessing The Damage. The steep decline accompanied by a sharp jump in volatility VIX had many questioning overall market health.

The bear flag formation and breakdown gave us a good forecast of the potential downside. However, the V-bottom action was wildly unexpected by many (myself included), and the recovery has been phenomenal.

From the August 5 article —

That’s quite a bit of damage in a short time and will likely take some time to rebuild.

I’m reminded of this famous quote from Walter Deemer - aka “Deemer’s Law of Perversity.”

The markets can be full of surprises.

After bottoming, the SPY gained (roughly) 9% in just 9 trading days 10% in 10 trading days.

Prices galloped over levels and jumped through gaps repeatedly on the way back up. Buying pressure has been immensely strong, and it continues today despite the presumed uncertainty of the Fed meeting in Jackson Hole later this week.

The market will want Jerome Powell to confirm or reassure that we will see multiple rate cuts by year-end.

Expectations seem rather high. Or, possibly, the anticipated rate cuts are being priced in as we speak. Whatever the case, buyers are active and adamant, pushing prices higher every day since August 5th.

Here are the charts to show us what has happened and the potential of what could be coming next.

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The Charts

SPY with a historical 10-day run showing that the bulls are alive and well. It has closed two gaps and created another so far, with one more overhead extending down from the all-time closing high. Price ends the day well above the 8-day MA, so this degree of extension should be noted. However, RSI is still quite a ways away from an overbought reading, clocking in at 62.52.

QQQ is even more impressive, up more than 13% so far in this move, though it remains further away from the ATH. Today’s closing price is nearly 4% higher than the 8-day MA, and surely, some rest and consolidation are coming soon.

IWM Even the small caps are behaving as IWM closes the large gap from late July. ~$212 was and still is an important level to be above.

DIA acts almost as if nothing ever happened. It’s less than 1% away from closing highs.

TLT is consolidating the recent breakout move, albeit in a very loose and wide fashion.

DXY Weakness in the US Dollar after getting rejected at resistance (noted many times here recently) continues to act as a tailwind for the stock rally.

BTCUSD continues its cumbersome action of false moves and fake outs while the $58k pivot area acts as a magnet.

What does it all mean?

Volatility came and went very quickly. With it came substantial expansions in price action, whether measured by VIX, Bollinger Bandwidth, or Average True Range. A revision to the mean in these levels is to be expected. And it will most likely show up in the charts as a mild pullback or a period of choppy sideways action.

With rate cuts all but expected now, Jerome Powell and the FOMC will look to be very gentle with their words and comments out of Jackson Hole this week so as not to spook markets.

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The Trade

Double down on patience and discipline.

If you didn’t buy the dip (or enough of the dip like me since I was gone for a week), now probably isn’t the time to chase. So keep the FOMO at bay and continue to focus on finding great reward/risk setups with attractive entries.

I’ll keep the charts and thoughts flowing on Twitter/X, and we’ll see what comes around.

On that note, I’m curious — would you be interested in seeing more individual stocks and ETFs charts and analysis here?

Let me know in the comments.

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The Disclosures

***This is NOT financial advice. This is NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.

Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”), an SEC-registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.

Statements in this article represent that person’s opinions only and do not necessarily reflect those of T3TG or any other person associated with T3TG.   

Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual, or it may reflect some other consideration. Readers of this article should consider this when evaluating the information provided or the opinions being expressed.

All investments are subject to the risk of loss, which you should consider in making any investment decisions. Readers of this article should consult with their financial advisors, attorneys, accountants, or other qualified investors before making any investment decision.   

POSITION DISCLOSURE

August 19, 2024, 4:00 PM

Long:  PLTR0823P32.5

Short:  

Options symbols are denoted as follows:

Ticker, Date, Call/Put, Strike Price

Example: VXX1218C30 = VXX 12/18 Call with a $30 strike