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“I generally avoid temptation unless I can’t resist it.” – Mae West
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Outside of the Dow, where futures are modestly lower, S&P 500 and Nasdaq futures are both higher, with the Nasdaq leading the way, looking at a gain of 0.45%. Despite no signs of tensions breaking down in the Middle East, crude oil prices are basically unchanged, and Treasury yields are slightly lower.
Asian stocks started the week mostly higher, with Japan up 0.7% while Chinese stocks rallied more than 1% despite weak economic data from both countries. South Korean markets were closed for a holiday, but the big news from that region was an action from President Trump to scale back joint U.S.-South Korea military exercises, citing ‘expenses’ and that country’s lack of material assistance with the war in Iran. It’s also an olive branch to North Korea to potentially get that country to provide less military assistance to Russia’s war with Ukraine.
In Europe, trading is much more subdued with the STOXX 600 up 0.1%, and the only country up or down more than 0.2% is Italy (+0.4%).
Earnings season is winding down, but on the economic calendar, Empire Manufacturing for August just hit the tape and doubled expectations to the upside (20.6 vs 10.0), while homebuilder sentiment, which is expected to tick down slightly from July, will hit the tape at 10 AM.
The S&P 500 eked out a fractional gain last week after breaking out to new highs in the week before. As earnings season winds down and August goes on, don’t be surprised if market activity starts to really slow down. That would probably be the best we could hope for given all the geopolitical issues simmering around the world.
The S&P 500 may have rallied to new highs last week, but the Nasdaq, which has been a long-term leader, has been lagging in the short term. While the index has broken its downtrend from the June highs, it remains more than 1.5% below that all-time high heading into the new week of trading. Besides that, the 50-day moving average has also started to slope downward, indicating the lack of upside momentum in the index.
We call semiconductors a leading indicator of the economy and the market, and the current picture isn’t particularly positive from a short-term perspective. The Philadelphia Semiconductor Index (SOX) is in worse shape than the Nasdaq. Not only has the slope of its 50-day moving average turned lower, but the index is still trading below that level. While it broke out above its June downtrend last week, the SOX is now boxed in between that former resistance and the 50-DMA, which it failed to clear on the upside last Thursday. The one caveat, though, is that the SOX’s Q2 rally was so far divorced from reality that some cooling off was inevitable. Taken together, Q2 and Q3 still leave the index in relatively good shape.
Bitcoin used to be considered a measure of risk tolerance in the market, but with all the excitement going on in the AI space, who needs crypto? Bitcoin remains stuck in a stubborn downtrend that has been in place for a full year now. For the last couple of weeks, the downtrend line and 50-day moving average have been acting as monkey bars that Bitcoin keeps riding along from below. It’s been a disappointing year for crypto, and the only selling point it has actually lived up to is being an uncorrelated asset.
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