Jackson Hole and Nvidia Loom, but Don’t Forget the Elephant in the Room
Will things get a little wild this week? Plus a look a close look at gold, the Utes and two potential tax-loss selling candidates.
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The Market
The week ahead brings us the last week of August, a Fed Chair speech at Jackson Hole, and Nvidia (NVDA) earnings. Can it be a wild and volatile week?
While it seemed rather dull, we did get quite a bit of volatility last week with the S&P 500 down for the five trading days. Since we all know I am terrible at narratives if you asked me to choose which event— Jackson Hole or Nvidia earnings — will move the market more I am not sure I could choose. Perhaps it will be neither or both!
The indicators might be helpful in that using my data I just don’t see the market back to a short-term oversold condition (it got overbought just over a week ago) until late this week. That tells me that a down move early in the week would give way to another oversold rally.
Perhaps a down move this week would lift the VIX to the point it has gotten jumpy. Perhaps a down move this week would get the put/call ratios back to showing some fear since there was no fear late last week with Friday’s put/call ratio chiming in at 0.72, the lowest reading since early August and prior to that early June.
The elephant in the room is obviously the bonds. Sentiment toward bonds, anecdotally, is terrible as we discussed last week. It’s almost unanimous that folks don’t like what Secretary Bessent did last week. And I suppose the fact that the bonds gave up much of the rally tells us that for now they are correct. The DSI is at 19. As a reminder, the DSI got to 10 on July 31, which for me means that I think bonds are trying to bottom.
The Utes finally took it on the chin on Friday. I had been looking for them to come back down to form a “W” but sometimes maybe I should be careful for what I wish for! I do, however, think if we let Friday’s whack settle for a few days the chart will start to shape up as a W. If I am wrong about this pattern, then I would suggest the market is in a much weaker condition than most think.
New Ideas
I do want to follow up on Nike (NKE), which I was asked about a few weeks ago. At the time I said a break of $40 would be bearish. But it broke and snapped right back. Let me say NKE has a habit of breaking and snapping back (see May, see June) so if it can stay over $40 and then cross that downtrend line, there is perhaps a bottom in the making. To me NKE might be the perfect tax loss-selling candidate for year-end, similar to the way Target (TGT) was when I recommended it last October.
Today’s Indicator
The number of stocks making new highs continues to be pathetic, but we’re watching the new lows, especially if the market comes down again this week. Fewer new lows (thus far they began contracting Wednesday) is a step in the positive direction. The NYSE saw 175 new lows Tuesday and Friday there were 80.
Q&A/Reader’s Feedback
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We’ll start with GLD since my inbox is full of questions on the SPDR Gold Shares. You may recall I turned bullish on GLD in late June when the DSI got to 10. I said any moves into the $360 area were buyable. I have not measured a longer-term target yet. There is a little gap to be filled around $428 and there is a small measured target around $430 as well. The DSI is currently 82 so the runway is getting short, thus I suspect if GLD gets anywhere into that $430-440 area the DSI is going to say, hang on, take some profits, meaning the DSI will scoot right up there near 90.
Should GLD fall back into the $400 area I would be a buyer. The caveat is that should the DSI get over 90, I will be a seller, not just a profit-taker.
Agnico Eagle Mines (AEM) is obviously overbought up here and it has resistance in the $225 area. I have a measured target in the $230-240 area. I would use the GLD DSI the same way here. A pullback to $200 is buyable as long as the DSI doesn’t get to 90 first.
Stellantis (STLA) is a little bit like Nike in that it just keeps making lower lows. Any stock that looks like this as we head into the fourth quarter will go on the list of tax loss-selling candidates. In the meantime, resistance is light at $5.50 and heavy at $6. If we get a pullback in the market and it can’t make a lower low I’d take that as a plus.
