This week, the retreat from high-flying tech names into more rate-sensitive ones began to take hold, with both the Nasdaq and the S&P 500 posting their second-largest weekly losses of the year. This shift is driven by growing optimism among traders about potential interest rate cuts, which would favor small-cap stocks and companies facing higher financing costs. Notably, the CME FedWatch tool indicates a 95% probability that the Federal Reserve will reduce rates in September. In other news;
- SMCI to join Nasdaq 100 on Monday
- Trump opposes rate cuts
- CRWD update causes global outage
- META betting big on eyewear?
- $14.2B spent during AMZN Prime Day
We’re now seven sessions into this rotation. Will small caps dig in and continue higher or was this just a flash in the pan? Let’s get into the charts and see how things are looking.
Weekly Analysis
SPY (SPDR S&P 500)
After finding nearly perfect resistance at the 1.618 golden Fibonacci extension last week, the SPY ETF reversed sharply lower to find itself at the bottom of the ascending channel, closing the week at $548.99 (-1.96%). A weekly bearish engulfing candle suggests the possibility of further downside, which is supported by the price closing below the daily 8/21 EMA cloud.
QQQ (Invesco QQQ Trust)
The pain continued for the QQQ ETF this week, which closed at $475.24 (-3.96%). With the price breaking down below the ascending channel and a seemingly imminent bearish 8/21 EMA cross on the horizon, the area of low volume looks primed for an eventual test.
IWM (iShares Russell 2000)
The rotation into small caps continued this week, gaining over 6% before a strong reversal on Wednesday. Despite this, the IWM ETF closed higher for the second week in a row at $216.84 (+1.74%), but put in a concerning Shooting Star weekly candle as the price fell back into the ascending channel. Bulls will be looking for the 8/21 EMA cloud to act as support next week.
Earnings
Notable Results
AXP (American Express)
- EPS: $3.49 vs $3.26 est
- SALES: $16.33B vs $16.59B est
NFLX (Netflix)
- EPS: $4.88 vs $4.76 est
- SALES: $9.56B vs $9.53B est
DPZ (Dominos Pizza)
- EPS: $4.03 vs $3.66 est
- SALES: $1.10B vs $1.10B est
ABT (Abbott)
- EPS: $1.14 vs $1.10 est
- SALES: $10.38B vs $10.37B est
TSM (Taiwan Semiconductor)
- EPS: $1.48 vs $1.40 est
- SALES: $20.82B vs $20.23B est
UAL (United Airlines)
- EPS: $4.14 vs $3.95 est
- SALES: $14.99B vs $15.10B est
USB (U.S. Bancorp)
- EPS: $0.98 vs $0.94 est
- SALES: $6.87B vs $6.80B est
JNJ (Johnson & Johnson)
- EPS: $2.82 vs $2.70 est
- SALES: $22.45B vs $22.31B est
ASML (ASML Holdings)
- EPS: €4.01 vs €3.71 est
- SALES: €6.24 vs €6.03 est
AEHR (Aehr Test Systems)
- EPS: $0.84 vs $0.10 est
- SALES: $16.60M vs $15.44M est
IBKR (Interactive Brokers)
- EPS: $1.76 vs $1.74 est
- SALES: $1.29B vs $1.26B est
SCHW (Charles Schwab)
- EPS: $0.73 vs $0.72 est
- SALES: $4.69B vs $4.68B est
MS (Morgan Stanley)
- EPS: $1.82 vs $1.65 est
- SALES: $15.00B vs $14.30B est
BAC (Bank of America)
- EPS: $0.83 vs $0.80 est
- SALES: $25.537B vs $25.220B est
UNH (UnitedHealth)
- EPS: $6.80 vs $6.66 est
- SALES: $98.855B vs $98.836B est
GS (Goldman Sachs)
- EPS: $8.62 vs $8.35 est
- SALES: $12.730B vs $12.456B est
BLK (BlackRock)
- EPS: $10.36 vs $9.93 est
- SALES: $4.81B vs $4.85B est
What’s Happening Now
QQQ (Nasdaq 100)
During election years, the Nasdaq 100 has consistently performed well at the end of summer, leading up to the fall season. With an 83% chance of rising and an average return of nearly 5%, tech stocks show promising potential for continued growth despite some recent volatility.
DKNG (Draftkings)
Thinking of placing a wager? Since its IPO 5 years ago, DraftKings has maintained a perfect 100% win/loss track record during the same week each year, averaging a 7.06% return. Will this streak continue despite co-founder Paul Liberman selling $26 million shares in June and a fresh $2.5 million this past week?
SMH (VanEck Semiconductor ETF)
This week, semiconductors swam in a sea of red, with SMH dropping nearly 10% since the market opened last Monday. However, there’s a silver lining: in April, SMH also fell 10% in one week but quickly rebounded with a 44% rally lasting nearly three months. Pullbacks are healthy in a bull market, often setting the stage for future gains.
Believe it or not, this is just a fraction of what happened in the markets this week. For a full run down delivered straight to your inbox every weekend, sign up for The Official Trendspider Newsletter!
Market Update Into September 7th: Inflation Data Incoming