I came in like a wrecking ball

I never hit so hard in love

All I wanted was to break your walls

-Miley Cyrus

There are a lot of potential wrecking balls as the calendar turns this morning, including the calendar, especially in years with mid-term elections.

The pattern has already begun. August began with a head of steam and finished being run over by a steaming locomotive. That locomotive is Jay Powell and the Federal Reserve, which reminds everyone, every day, that they are going to derail this economy with little regard to how ugly the damage is.

They have gone from sanguine and transitory to savage and determined to show who is the boss. Grudgingly, the market is beginning to listen, as each session this week had flash moments of moving higher, only to have nascent rallies stall, giving way to very ugly closes.

Nowhere to hide (except crypto):

• S&P 500 (SPX) -0.78%
• Nasdaq Composite (Comp) -0.56%
• Dow Jones Industrial (DJI) -0.88%
• Russell 2000 (RUT) -0.62%
• West Texas Intermediate (WTI) -0.50%
• Bitcoin (BTC) +1.99%
• Ethereum (ETH) +3.46%
• Gold (GLD) -0.38%

 

Communication Services (XLC) avoided closing in the red by the slimmest margin possible, but it was still one of the worst performers in August.

Technical View

The S&P 500 is well below the 50-day moving average, and it now must hold 3,900. Money flow suggests a move to 3,666, where it would retest the 2022 low, possibly before hitting oversold, which is a buy signal.

Volatility Spike

Also, be on the lookout for increased volatility – but something tells me you already knew that.

After the Close

A bunch of sexy hot software names posted results after the close. And each was greeted with the Bronx cheer. It was ugly: C3.ai Inc

• C3.ai Inc (AI) -16%
• Mongodb Inc (MBD) -13%
• Okta Inc (OKTA) -12%
• Veeva Systems (VEEV) -11%
• Semtech Corp (SMTC) -7%

The problem is guidance. These stocks are already down a ton from their all-time highs. And many never lived up to their Initial Public Opinion (IPO) hype. But even within niches like SaaS (software as a service), where there are money makers like granddad Salesforce (CRM), gaining traction has been difficult. 

Our Crowdstrike Holdings (CRWD) position posted the perfect quarter this week, and that stock has been slammed. So, it’s not just a matter of valuations and poor execution; this is a knee-jerk aura that says kick them to the curb no matter how good the news. And when there’s bad news…pounce! What?

iShares Expanded Tech-Software-Sector ETF (IGV) must hold 260 if it gets down that far.

Portfolio Approach

We are suspending our Current Buys list in our Hotline model portfolio.

Today’s Session

The market was soft all morning, and it got even weaker on "good" news.  Initial jobless claims decreased for the third consecutive week coming in at 232,000 against consensus of 248,000.   This news pressured stocks, sent bond yields higher and the dollar gained as well.

The 2Q productivity declined 4.1%, but that was better than expected - so "good" news. 

There is lots of pressure in this market, as everyone is spying the exits. All eyes on jobs report in tomorrow.

Comments

How about the song by Green Day.... wake me up when September ends... ha, ha! Love your show and newsletters.. Thanks, Dwight Dwight Emmons on 9/1/2022 1:23:15 PM

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