The stock market decided to end July with some fireworks! This is the volatility I was referring to in my last post.
From a timing-cycle perspective, this drop is right on course. And the futures are indicating further downside today, although things could reverse course after the monthly nonfarm payrolls report due out at 8:30 AM. As of this writing at 6:30, we’re sitting right on the 20 week moving average I refer to in the video below. This will be the first to test to see if buyers are interested here or if we need to continue lower still.
Two things stand out to me right now. 1) High Yield Bonds have been falling since the end of June and were basically predicting this drop. Stocks could see weakness until they stabilize first. 2) I would expect the US dollar to be down against the Japanese yen after a drop of this magnitude but it was actually up yesterday and today. The dollar has been rallying the past few weeks for a multitude of reasons but really took off against the yen this week after the strong GDP report as it indicates we could see higher interest rates sooner rather than later. If this is the case, this is a strong sign that this drop will play out to be another textbook pullback that should last a few weeks at the most.
Here’s today’s video outlining some key levels I’m watching to step in at and do some buying:
I hope everyone has a great weekend!
-Nick
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