Good evening. The stock market had its third red week in a row, with mega tech earning results disappointing investors. All eyes are still on the Fed interest rates and whether we’ll have a rate cut in September or not. Here are the top stocks to watch this week and what’s moving the markets.

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Top Stocks & Setups To Watch This Week

• $DKNG
Break above 34 🎯 35.49 & 37.15
• $WFC
Break below 52.66 🎯 51.27 & 49.53
• $COIN
Break above 212.25 🎯 229.15 & 242.87
• $GOOGL
Break below 164.06 🎯 160.22 & 156
• $AMD
Break above 139.89 🎯 148.76 & 154.40
• $AAPL
Break below 214.62 🎯 210.30 & 206.59

KV’s S&P 500 Analysis

KV here with your weekly SPY levels! The S&P 500 just had its third straight red week, being down -2.1% for the week after some volatile swings. The last time this happened the S&P 500 was followed by a 13% move thereafter. Currently, the $520 zone is going to be strong with buyers, but we’ll be looking at this week to understand if the demand will be strong enough to hold, or if we will see a sell-off down below the $500s.

Weekly Market Recap

Fed Policy Shift

After an extended period of aggressive tightening, the Fed signaled that an easing cycle might soon begin, keeping rates unchanged but hinting at potential cuts. Inflation has fallen below the Fed's 2.8% year-end projection, and the unemployment rate has risen above 4%. The labor market data is now as critical as inflation data in shaping future Fed decisions. We expect the Fed to cut rates two or three times this year, given the softer inflation and labor market trends.

Labor Market Adjustments

The U.S. labor market is cooling, with July's payrolls adding fewer jobs than expected and the unemployment rate rising to 4.3%. Despite this, the labor market remains healthy, with average payroll gains in line with the last economic expansion and job openings still exceeding the number of unemployed. The recent data suggests the labor market is adjusting to slower economic growth, which supports expectations for a September rate cut. However, caution is advised as this is only one month's data.

Yield Curve Normalization

The yield curve has been inverted for over two years, but with the Fed hinting at rate cuts, bond yields are dropping. The 2-year yield fell below 4.0% and the 10-year below 3.90%. We expect short-term yields to fall faster than long-term yields, normalizing the yield curve. Tech stocks reported strong growth but faced high expectations, leading to corrections. We anticipate a balanced market leadership with contributions from cyclical and defensive sectors, emphasizing the importance of diversification in portfolios.

Coming Up…

After leaving such a volatile week in the markets, the ISM Services PMI for July and consumer credit data don’t seem that important, but those numbers will be on the economic watch this week. On the earnings front, PLTR, SMCI, SHOP, DIS, UBER, HOOD, LLY, ABNB, FUBO, CVS, PLUG, DDOG, CAT, and OXY are expected to report this week.

Key Headlines We’ve Been Reading

This is what’s caught our eye over the past 7 days.

• Kamala Harris campaign raises $200 million in a week.
• Venezuela's Maduro, opposition each claim presidential victory.
• Intel is laying off over 15,000 employees and will stop ‘non-essential work.’
• Kyiv strikes Russian military airfield and oil depots in overnight drone attack.
• Buffett cuts Bank of America stake, sales top $3 bln.

Trading Rule Of The Week

That was it for this week!

Stay safe,
KV 👋

Week #32 | August 4, 2024

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