'Psychological Milestone': Stock Market Update For The Week Ahead

By Renato Capelj of Benzinga.com

Sunday, August 23, 2020 4:58 PM EDT

The Last Week In A Nutshell

“The market has taken us on a roller coaster ride that no one would have believed — from the depths of March 2020, when we dropped to a level last seen in 2016 (e.g., $2,237.40 on the S&P 500) to a 51% rally back to reclaim an all-time high,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

“We’ve officially entered a new bull market,” said Lindsey Bell, chief investment strategist at Ally Financial Inc. (ALLY)-owned Ally Invest.

“For some, it’s a major psychological milestone. Things still feel far from normal, but the market has successfully summited a mountain of worry. And when a new high follows a major decline, momentum tends to be on the market’s side. Since 1950, the S&P usually hits multiple record highs in the month after reaching its post bear-market peak.”

Pictured: Profile chart of the S&P 500 E-mini Futures

Technical Analysis and Recap

Broad-market equity indices ended the week mixed, with the S&P 500 recovering its all-time high on relative strength from the technology sector.

Monday’s higher open on earnings and stimulus talks was followed by a balanced, low-volume session which migrated value to the top of prior balance. The market caught up to Monday’s delta, edging higher overnight on better-than-expected retail earnings, before liquidating, making a V-shape recovery and resolving some resting liquidity at and above the $3,390 area.

On Wednesday, after the Federal Reserve signaled signs of a difficult recovery, the market left value behind on a spike and repaired some weak structure in the $3,350 region. Responsive buyers quashed Wednesday’s weak-handed initiative activity, driving prices higher into Friday’s monthly options expiration, albeit with minimal participation from the broader market.

Overall, the week ended in balance again. In light of dull participation and poor structure on both sides of the market, attention has to be shifted to other stimuli, such as the cessation of a trend in heavily weighted index constituents and decreased dealer hedging flows.

If momentum was to grow faint, there’s the potential for a fast-moving correction of the poor structure created by anxiety-driven participants. Still, the path of least resistance is up.

Key events going forward include GDP Estimate; Initial Claims; Consumer Spending; Core PCE Price Index; University Of Michigan Sentiment; Conference Board Consumer Confidence Index; Jackson Hole; and New Home Sales.

Fundamental Events

Trading improves as China leads upswing; virus resurgence may delay negotiations.
Urban markets will recover after pandemic as Americans’ housing decisions evolve.
The ECB has signaled September to be a key month to read the economic recovery.
China: Virus under control, V-shape recovery and strong demand, politics to worsen.
Fund managers pulled out of the iShares IBoxx Corporate Bond ETF (LQD).
COVID-19 coronavirus drop in fuel demand to weaken credit metrics through 2022.
Fearing a shipping crunch, retailers have initiated the earliest-ever holiday sales plans.
Despite recovery, economists suggest an unemployment tsunami maybe coming.
The peak leisure travel season is ending, and so might airlines’ modest recovery.
American Airlines Group (AAL) attracts shorts on suspension of flights.
Wells Fargo & Co. (WFC) resumed job cuts, in-line with cost-cutting plans.
Deere & Co. (DE) shares hit ATH after company lifted its full-year forecast.
Three new U.S. stock exchanges are set to launch by the end of September.
Facebook Inc. (FB) weighs the kill switch for political ads after elections.
Canada June retail sales rose by a record 23.7%, rising above pre-pandemic levels.
Why investor concerns over a Democratic win and tax increases are valid, but could be overdone.
Eurozone money supply surge will not spark inflation in the near-term.
U.S. dollar loses value and influence as debt rises, tax consequences uncertain.
Stimulus has largely been offset by a decrease in the volume of transactions.
As homebuilder confidence matches record high, mortgage delinquencies rise.
Rising value of gold is evidence that the U.S. could be debasing its currency.
Detailed analysis on global venture funding during the coronavirus pandemic.
Asset managers at major U.S. investment firms encourage stock buying.
Uber Technologies Inc. (UBER) and Lyft Inc. (LYFT)'s futures in California are in the hands of voters.
Johnson & Johnson (JNJ) to test coronavirus vaccine in 60,000 volunteers.
Delay in fiscal support is negative for the U.S. economy and consumer-facing sectors.
Target Corporation (TGT) hit a sales record on the online shopping surge.
Market rally has more to do with asset inflation, which is fueled by liquidity support.
Corporations will assume the burden of safety, rising costs, and lowering capacity.
People ready to start their household growing again, builders playing catch-up.
General Motors Company (GM) bets on electric Cadillacs, micro vans.
Southwest Airlines Co. (LUV) expects slower cash burn as bookings improve.
Fed policymakers see more easing ahead to help brace economy, sustain recovery.
OPEC+ pressed oil nations pumping above targets to cut more in August-September.
Lowe’s Companies Inc. (LOW) beats sales expectations on spending surge.
NY Fed’s index of real-time economic data showed a significant rise in its first revision.
Inflation is happening in the basket of goods that excludes food, fuel and housing.
Analysis confirms the picture of rising income inequality and slowing income growth.
Sentiment: 30.4% Bullish, 27.2% Neutral, and 42.4% Bearish as of August 19.
Gamma Exposure: (Trending Lower) 3,109,556,133 as of August 21.
Dark Pool Index: (Trending Lower) 42% as of August 21.