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8/31/22 The Sweet Spot Ahead … Your September Outlook

News:

The bulls opened the market on Tuesday … But the bears closed it.

76% of all stocks ended lower.

The selloff was relatively uniform across the indexes…

  • Dow Jones -1.0%
  • Nasdaq -1.1%
  • S&P 500 -1.1%
  • Russell 2000 -1.5%

Fear of the Fed and seasonal weakness drove the selling.

Sector Round-Up

All 11 sectors closed red.

S&P 500 map
Image from Finviz

Losses ranged from -0.5% in Financials (XLF) to -3.4% in the volatile Energy (XLE) sector.

  • The price of crude is falling. It’s trading below $90 per barrel this morning.

Retail Spending

Smaller retailers are reporting earnings this week. Best Buy (BBY) and Big Lots (BIG) missed expectations and lower guidance.

Best Buy and Big Lots Store Fronts
Images from Best Buy & Big Lots

But the stock prices rose.

  • BIG +12%
  • BBY +2%

It could be that investors believe the companies are taking the necessary steps to improve the bottom line. It could be that these are the next meme stocks. Time will tell.

Crypto Bulls

Bitcoin^ continues to trade above the critical support level of $20K

The global market cap for crypto is holding above $1 trillion.

As long as the crypto market continues to hold these levels, the bulls should be able to take the markets higher in the near future.

But we still have a month left in the weak spot…

And anything can happen.

Technicals:

Markets are nearing oversold levels.

Take a look at this chart tracking the S&P 500…

SPY chart with RSI levels shown.
SPY Daily Candles – Chart via thinkorswim

Every time RSI levels drop below 30, we get a reversal. Don’t expect this time to be different.

And our signals are beginning to align…

  • The Put-to-Call Ratio closed extremely oversold for a second day (bullish)
  • The VIX is above 25 but failing to make any additional gains (bullish)

We expect a local bottom to form in the next few weeks. Our target buy area for the SPY is between $380 and $390.

Timing:

Your September outlook is here. 

September, on average, is the worst month for stocks … The blame can go to…

  • The start of the fiscal year
  • The end of vacations
  • Kids heading back to school

It also marks the end of Q3 and the end of the known “weak spot” in the four-year market/election cycle.

These are the important events in the month ahead…

  • 9/2 Unemployment rate
  • 9/5 Markets closed for Labor Day Holiday
  • 9/13 CPI inflation data release
  • 9/16 Univ of Mich Consumer Sentiment
  • 9/16 Triple witching
  • 9/21 FOMC meeting concludes, rate hike announced

Our advice: Hold what you got and look to add on dips in the coming month.

Watchlist:

*Low Float
^Open Position

*NERV is on watch
*RVPH resistance at $3
COGT
support at $16
VERV support at $37
AREC support at $3
FLNC support at $19
DXLG support at $5.50
DNOW support at $12
^GEO support at $8
TCRT support at $2
^GERN resistance at $2.50
TAL support at $6
GSAT support at $1.80

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