There’s More Chop To Come
It’ll be both volatile and inconclusive.
“On the heels of an insane week,” Mish Schneider opens her Weekly Market Outlook, “we have another potentially insane week.”
Mish notes today’s release of Producer Price Index data and tomorrow’s release of Consumer Price Index data for July as well as earnings reports from 975 companies.
The long-simmering conflict between Israel and Iran is heating up too, and Ukraine is taking territory in Russia’s Kursk Oblast region, so there’s that.
Crude oil did jump more than $3 per barrel and nearly 4 percent, and the CBOE Volatility Index $VIX bounced above 20 again.
But equity indexes were mixed-to-negative, investors, traders, and speculators still largely focused on PPI, CPI, retail sales, and employment data.
It was oil’s biggest move in 10 months, but there were technical factors at play too.
And, otherwise, things were relatively calm.
It will get loud again. It’s only a matter of time.
Still, it’s reasonable to conclude that what happened last Monday had a cleansing effect for investors, traders, and speculators.
Let’s call it the Carry Trade Catharsis. Anybody who was offsides has been blown back and maybe even out of the game for a while.
The context and the circumstances are not really ripe for a market-moving credit-event-from-nowhere.
That’s not to discount black swans altogether. Quite the opposite: Bad things happen, and we move forward.
So between now and August 28 – when Nvidia $NVDA reports earnings – let’s keep in mind the major trends.
Within the long-term up-and-to-the-right history, at least from 1988 through 2023 August has been the worst month of the year for the Dow Jones Industrial Average.
It’s been the second-worst month for the S&P 500, the Nasdaq Composite, and the Russell 2000.
Based on data for the first five trading days of this one plus another 36 years of seasonal patterns, Jeffrey Hirsch of The Stock Trader’s Almanac suggested last week that “more chop and volatility is likely in store for the market in the near term.”
The indexes will bounce around but make little progress, according to Hirsch. Potential risks include US presidential politics as well as Middle East and Central European warfare.
Geopolitics is why crude oil spiked on Monday. But markets have grown used to regional and even world wars. What they don’t like is “uncertainty.”
Commerce will out, to the end.
And, as my technical analyst and chart artist friends like to say, “Price is the only thing that pays.”
