The market was unfazed last week when the not so great, but no disaster CPI data was released. If the market sentiment was bearish when the slightly hotter CPI data was released, the shorts would have taken the opportunity to push it down hard. We didn’t find any evidence of hard selling, but no buying either. The market is simply waiting out the seasonally weak September.
The September Fed rate decision is to be released next Wednesday at 2:00pm. The market is anticipating a pause from the Fed even though the CPI was a little higher than expected. If the Fed pauses, that would mark the end of the rate hiking cycle. It’s possible that the Fed could be forced to re-start the rate hiking shortly after this pause, but it is highly unlikely because the Fed monetary policy is not a small matter that its direction can be changed too frequently. At least that’s what happened in the past. Once the Fed makes up its mind, they would stick with it for a while.
The NASDAQ and S&P 500 made a low on 8/18/2023. Now it has been 19 trading days since the 8/18/2023 low. The DOW made its low on 08/25/2023 and it has been 14 trading days since the low. It would be logical for the market to react to the Fed decision next week to conclude the daily cycle. But will the market rally really hard in September? It’s hard to expect that. The UAW strike is not a good news for the market. The pending government shutdown at the end of September is not good either, although sometimes the market just ignores the idiots from Washington D.C.
Technically, the rally started in October 2022 is making its seasonal top now. The 8/18/2023 low is not a reliable low since it happened in a seasonal top location. August is known to make season highs. October is know to make seasonal highs or lows. In other words, the 8/18/2023 is not the final low in this pull back against the July high. We still expect another low in October before this pull back is completely finished. The October low doesn’t have to be lower than the August low to conclude the pull back. It just needs a little more time to finish the process.
We went long against the August low, but we have been trimming positions after the initial thrust. September is simply a bad month to go full in.
PLTR had its hyped AIPCON last week. It was a dud. The CEO is kind of weird and it’s hard to understand sometimes. The stock has been held up by the anticipation of the event while Nvidia has been trading down. So finally PLTR traded down along with the general market last Friday. PLTR is forming a head and should pattern if the neck line at 13.60 support level is broken. With the general market weakness, we wouldn’t be surprised to see it trades back down to its 200-day MA at around 11. We definitely will add more PLTR around 11.
Below is the NASDAQ daily chart.
It is 19 trading days into the daily cycle that started on 8/18/2023. The reaction to the Fed meeting next week will determine the shape of this daily cycle.
Overall, we don’t expect a market crash at this time. The hard landing scenario probably will not come until after the 2024 election. The democrats are running for re-election in 2024 whether Biden is in or not. We typically don’t see a meltdown of the stock market right before a re-election.