Yesterday, the market was scuffed up well but still showed spunk here and there. Now, the question is whether this is an overdue pause or something more nefarious.

Judging by the action in the CBOE Volatility Index (VIX), a.k.a. the “Fear Index,” this is just a tiny bump in the road. Ironically, that lack of action spooks those who see the opposite narrative in all data (especially if it can be twisted negatively).

Market Breadth

The volume remains light, but it is turning decidedly negative, nothing alarming, just a session with more sellers than buyers.

Market Breadth	NYSE	NASDAQ
Advancers	1,088	1,439
Decliners	1,805	2,866
New Highs	38	49
New Lows	88	184
Up Volume	1.14 billion	1.62 billion
Down Volume	2.25 billion	2.57 billion

Stock Slide

The number of names trading above their 50-day moving average continues to slide, nearing the lowest levels of August and May.

Interestingly, however, the market has been a buy when internals reach specific points. I think that could be the case once again.

I’m unsure when the market will return to a ‘normal’ period with widespread participation in a rally. 

Colorful Beige Book

The summary underscores late-stage travel demand, slower retail spending, and the probability that consumers have “exhausted” their savings. Now, consumers are relying more on borrowing to support spending.  It should have read: their spending habit because it's become an addiction.

If running out of money and maxing out credit cards is the only remedy for America’s spending addiction, then we are halfway there. Don’t look now, but according to the Bureau of Economic Analysis (BEA), only $100 billion is left out of the $2.1 trillion used to buy the midterm election.  That was a little tongue-in-cheek as the real goal was to prove that ‘free money’ is an actual solution to all our problems.  It's not.

Goldman & Goldilocks

Goldman Sachs (GS) continues to push a Goldilocks scenario with only a 15% chance of a

recession, and spending will remain elevated.

It looks as if GS sees a blockbuster back-to-school shopping season and a Christmas much merrier than the rest of Wall Street.

 

Portfolio Approach

We closed a position in Technology yesterday in the Hotline Model Portfolio.

Today’s Session

The market opened under pressure largely as two important ‘generals’ struggle.

Apple (AAPL) are down on reports China will widen its iPhone ban.  It is unclear how much is saber-rattling and how much would be permanent. The US and China are in a deepening cold war, and while Tim Cook has worked feverishly to appease President Xi of China, the recent expansion of operations outside China (particularly India) aren’t helping.

We’ve seen this movie before, and it usually corrects itself, but the near term looks shaky.

And the current King of Tech is having problems.  NVidia (NVDA) shares have failed to capitalize on one of the most amazing earnings reports I have ever seen.  Some of the call was built into the share price, but not the guidance, which rewrote the record books.

That said, technical failures trigger selling, which is also getting a push from a massive online effort to bring the share price lower.  I’m still a believer, but I don’t like fighting the tape.  We have taken off the new buy list until the shares settle down.

All of this conspiring adds pressure to the NASDAQ composite, which has seen the 20-day moving average slip below the 50-day.  This is a battleground area where buyers have been buying weakness.

Comments

My answer in general is No. With personal debt maxing and the resumption of student loan payments next month, it will be interesting to what the overall impact becomes. The combination could also result in weaker Christmas sales this year. If it does and the Fed isn't paying attention to this potential. Katty bar the door! Terry Dowler on 9/7/2023 9:04:32 AM

Can Americans keep the spending going? Yes Should Americans keep the spending going? No. If history serves as a guide, Americans will spend until it is realized they have gone too far. Then a correction will happen, probably large initially. It is difficult to see past the impact of excess personal consumption of those who are about to face significant expenses in the form of student loan repayments. It has the potential to be a train wreck. Karl K on 9/7/2023 11:33:45 AM

No way! Bart Farris MD on 9/7/2023 12:17:52 PM

Congress will keep spending and printing money until the conservatives really tighten it down. Bob Avery on 9/7/2023 5:35:09 PM

I think Americans will continue to spend until Hell freezes over and the current administration actually hold people and itself accountable for their debts. John Holmes on 9/9/2023 6:09:35 PM

No! Margaret Campbell on 9/12/2023 8:52:17 PM

At some point the straw will break the camel's back. Frank J. Cann on 9/20/2023 2:35:35 PM

Can we print money too ;) Steve Grubor on 9/22/2023 2:22:27 PM

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