Stock Market

Fed heroics or no, the S&P 500 level is destined for a retest of lows. These are the levels to watch, says this strategist – News Opener

In the words of the great Bonnie Tyler: “He’s gotta be sure, and it’s gotta be soon, and he’s gotta be larger than life.” The hero this market is holding out for is Fed Chair Jerome Powell, and he’s talking Friday, so that’s soon. Whether he’s sure remains the question.

“Speculation is running so hot ahead of his remarks that it feels like even subtle variations in intonation could make a difference to jittery markets,” notes AJ Bell investment director Russ Mould.

Our call of the day from the founder and managing partner of Fairland Strategies, Katie Stockton, has her eyes on some bearish signals for the S&P 500, Fed heroics or no.

She flags short-term oversold conditions in higher growth areas of the market that could help stocks bounce in coming days, especially in a case of well-received Fed comments. “We want to use these relief rallies, which we see as bear market relief rallies as opportunities to reduce exposure to avoid that next downdraft,” she said in an interview with Real Vision on Wednesday.

Stockton went through some technical indicators she’s been watching. For example, she sees signs of a long term downtrend in the S&P’s 200-day moving average, a popular short-term momentum gauge, that flipped to a sell signal recently.


Fairland Strategies

“Even if we were to see the S&P 500
SPX,
+0.29%

inch above that 200-day moving average, it wouldn’t change for us. We say that because the long-term setup really still is very challenged,” said Stockton.

She also notes the years 2008 to 2009 and 2000 to 2002 “saw retests after retests of that oversold territory,” meaning a bottom for stocks will be a process, she cautions.

“I think the hope that there’s some V bottom already in place is really just that —hope — because that’s what we became accustomed to during corrective phases, but indeed, we think that this is something more than that,” said Stockton.

Stockton is eyeballing a level of support taken from a Fibonacci retracement level — horizontal lines that point to possible support and resistance — around 3,815.

“Now if that level is broken, then we feel that there is really signifcant downside risk to about 3,200, which is the secondary Fibonacci retracement level. We would not rule that out as part of this scenario. But 3,815 is the key support in our work. And we do expect it to ultimately be retested,” said the strategist.

She said utilities and energy are all that’s left in the stock market for the longer term. Her company recently launched the Fairlead Tactical Sector ETF
TACK,
+0.08%
,
that’s exposed to those sectors, risk-off assets, short-term Treasuries, long-term Treasuries and gold — a very bearish positioning.

The markets
Fed heroics or no, the S&P 500 level is destined for a retest of lows. These are the levels to watch, says this strategist - News Opener

Stock futures
ES00,
+0.55%

YM00,
+0.27%

NQ00,
+0.69%

are moving higher, while Treasury yields
TMUBMUSD10Y,
3.111%

TMUBMUSD02Y,
3.391%

are dipping, and the dollar
DXY,
-0.22%

is tilting south, which is lifting gold
GC00,
+0.69%
.
Oil
CL.1,
+0.11%

BRN00,
+0.45%

is flat.

The buzz

Results ahead from Dollar Tree
DLTR,
-0.08%
,
Dollar General
DG,
-0.06%

and Big Lots
BIG,
-3.67%

may offer clues to consumer belt-tightening. Peloton
PTON,
+20.36%

shares dived after the bike maker lost more than $1 billion in the quarter and gave a disappointing outlook.

Nvidia
NVDA,
+0.24%

shares slumped after a cautious outlook from the graphics chipmaker. Here’s what analysts are saying.

Salesforce
CRM,
+2.28%

is slumping after the cloud-software group pledged $10 billion in stock buybacks, but cut its annual forecast and missed third-quarter guidance expectations.

Snowflake
SNOW,
+4.19%

is surging after the data software group’s revenue cruised past forecasts.

Tesla’s
TSLA,
+0.22%

three-for-one stock split takes effect Thursday. Not everyone is excited.

Swiss pharma Novartis
NVS,
+0.16%

NOVN,
-0.47%

will spin off its generics-and-biosimilars division Sandoz in a dual Swiss/U.S. listing.

GDP for the second quarter, alongside weekly jobless claims are due at 8:30 a.m. Eastern Time. The Jackson Hole gathering kicks off Thursday, but we’ll have to wait until Friday to hear from Fed Chairman Powell.

China added another $146 billion of stimulus to its troubled economy, this time zeroing in on infrastructure.

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Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:

Ticker

Security name

TSLA,
+0.22%
Tesla

BBBY,
+18.00%
Bed Bath & Beyond

GME,
-3.07%
GameStop

AMC,
+0.21%
AMC Entertainment

APE,
+1.57%
AMC Preferred Holdings

NVDA,
+0.24%
Nvidia

AAPL,
+0.18%
Apple

NIO,
+3.17%
NIO

AMZN,
+0.13%
Amazon

BBY,
-1.53%
Best Buy

The chart

“Copper is looking more bullish and might be the metal to favor for a more meaningful move into year-end,” says Mark Newton, head of technical strategy at Fundstrat, in a note to clients.

A “meaningful lift off July lows despite economic data that’s been less than stellar” marks a technically bullish move that should drive copper to near 380-386 in the near-term, said the strategist. “Then, following a minor pullback in September, I expect a much more meaningful rally which should test Spring 2022 highs.”

He likes buying Freeport McMoRan
FCX,
-1.48%

on dips into late September as well as copper themed ETF.

Fed heroics or no, the S&P 500 level is destined for a retest of lows. These are the levels to watch, says this strategist - News Opener

Fundstrat

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