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Market Outlook- Tightening is Real- 29 Aug, 2022

Dallas manufacturing index is released at 10:30am today and we do have some very big auctions today as well

It’s going to be a fiery week with a lot of motion in the markets before the employment numbers on Friday. Add to that a Fed President speaking every day – and we are likely to have whipsaw action.

Back half of the week is packed of info

There is some sense of gloom afoot in the markets here but here is what the three months looks like in the SPX.

There are bright spots to be had and pullbacks like these give us opportunities to position in strength without larger risks

This implies that the trading cycle we sit in requires patience if we are to make it out the other side of these with as few scrapes and bruises as possible.

The broad formations show that the levels showing in both SPY and ES_F are critical to hold, else we drift to deeper support. Remember – the market is a bullish mechanism by default so every drift down is a hunt for support and a space that traders agree on VALUE so that they can rebuild the strength of their position.

The SPY-the trend is clearly down and the overnight pause suggests that we move further down before we bounce

SPY traders trying to hold 400 region. The VIX has moved over 25% in a couple of days – the number that we watch here is 30 (in the VIX)

The ES_F

ES_F trying to hold the 4000 area – your levels are in the Teams room

I am still a big fan of the energy, metals, industrials, and biopharma regions

I’m looking for entries in AZN and to keep the current metals positions we have. It’s very obvious things are broken underneath as interest rates rise – but it takes a long time for things to break and we should see plenty of signs. As a note for those wondering – I am still more than 50% in cash, though I was at 80% before the last run.

My suspicion is that if the $DXY gets over 112, some very big things will start to break and we will be watching that closely. This is not the time to load up on anything in the portfolio- the market has to shake some trees and if the employment numbers are soft, we could see some very big moves into the close of the week.

Here is the DXY

Quite a bit of resistance here, and if it fades, other currencies will have a chance to take a breath.

I am out of the office at noon today but will have my equipment with me to watch the motion. The 10:30am Dallas Manufacturing Index will be one to watch. In general, it looks like the broad markets test lower before we stabilize into what looks like a higher low to me for now.