Weekly Trader's Outlook

If you read last week's blog you might recall that I had a "Moderately Bearish" forecast for this week, citing a bearish shift in the near-term technicals. At the time of this writing, the S&P 500 is on track to register a 2.5% weekly gain, so my forecast turned out to be wrong. I'm still near-term cautious until/unless the SPX eclipses last Thursday's all-time high (more on this in the "Technical Take" section below) but am also impressed with the persistence of the dip buyers.

Earnings have continued to support of the bullish narrative, especially those coming from the technology sector. Out of the 453 S&P 500 companies that have reported, 69% have beaten on the top line with an 81% beat rate on the bottom line. Q2 revenue growth is currently tracking at 6.03% year-over-year with EPS growth coming in at 11.41% thus far. Last week the EPS growth rate was just 8.50%, so the jump signals the strength of this week's report. Notably, several AI and AI-adjacent tech companies delivered strong results, which suggests more room for growth in the AI secular growth story. Palantir (PLTR), Arista Networks (ANET) and Astera Labs (ALAB) all gapped up to fresh all-time highs following their results.

On the trade front, tariffs on more than 90 countries around the world took effect yesterday which raised the overall average effective tariff rate from 10% to roughly 17%. Separately, U.S. President Trump threatened to raise the tariff rate on India to 50% unless the country stops buying Russian oil. Switzerland, which is subject to a 39% tariff rate, said it will hold an extraordinary meeting after its officials were unable to reach a deal with the United States. President Trump also said he will put a 100% tariff on semiconductors, but not for companies that are building in the United States. And earlier today the Financial Times reported that the Trump administration is imposing tariffs on imports of one-kilo gold bars.

At the time of this writing (2:40 PM ET), all the major indices are trading higher (DJI + 253, SPX + 51, COMPX + 202) as markets maintain this week's upward bias. I think a lot of the melt-up in stocks has to do with optimism around economic growth related to heavy investment in AI and onshoring in the U.S. due to Trump's trade policy. And Q2 earnings have been supporting that notion, apart from some consumer-related names due to tariffs. While the full extent of the recently imposed higher tariff rates hasn't been absorbed yet, and the economic impact remains unknown, investors appear to be willing to wait until the evidence shows up in the hard data.

Next week we'll get the monthly inflation reports (CPI/PPI) and a read on the health of the consumer (monthly Retail Sales report), along with earnings from several high-profile names (CSCO, AMAT, DE, CRWV, CRCL, etc.), so the potential for market volatility is there. From a technical perspective, the Nasdaq hit a fresh all-time high on an intraday basis today, which is bullish, but I'm near-term cautious on the SPX until it surpasses last Thursday's high (more on this in the "Technical Take" section below). I'm also cognizant of the bearish shift in seasonality that is underway. While this doesn't guarantee a pullback in stocks, I think its important to respect it in light of the ~28% rally that stocks have staged off the April lows. Therefore, my forecast for next week is "Cautious". What could challenge my forecast? If the inflation data comes in cool, or the Retail Sales report confirms consumer strength, this could provide more justification to push stocks higher.

• Monday (8/11): No reports
• Tuesday (8/12): Consumer Price Index (CPI), Treasury Budget
• Wednesday (8/13): EIA Crude Oil Inventories, MBA Mortgage Applications Index
• Thursday (8/14): Continuing Claims, EIA Natural Gas Inventories, Initial Claims, Producer Price Index (PPI)
• Friday (8/15): Business Inventories, Capacity Utilization, Empire State Manufacturing, Export Prices, Import Prices, Industrial Production, Net Long-Term TIC Flows, Retail Sales, University of Michigan Consumer Sentiment- Preliminary

• Monday (8/11): Aaon Inc. (AAON), Archer Aviation Inc. (ACHR), AST SpaceMobile Inc. (ASTS), Barrick Mining Corp. (B), Celanese Corp. (CE), Franco-Nevada Corp. (FNV), Oklo (OKLO), Monday.com Ltd. (MNDY)
• Tuesday (8/12): Cardinal Health Inc. (CAH), CAVA Group Inc. (CAVA), Circle Internet Group Inc. (CRCL), CoreWeave (CRWV), H&R Block Inc. (HRB), Lumentum Holdings Inc. (LITE), Sea Ltd. (SE), Rigetti Computing Inc. (RGTI)
• Wednesday (8/13): Brinker International Inc. (EAT), Cisco Systems Inc. (CSCO), Coherent Corp. (COHR), Elbit Systems Inc. (ESLT), Loar Holdings Inc. (LOAR), Performance Food Group Inc. (PFGC), Stantec Inc. (STN)
• Thursday (8/14): Alibaba Group Holdings Ltd. (BABA), Applied Materials Inc. (AMAT), Deere & Co. (DE), JD.com Inc. (JD), NetEase Inc. (NTES), Nice Ltd. (NICE), SanDisk Corp. (SNDK), Tapestry Inc. (TRP)
• Friday (8/15): BitFuFu Inc. (FUFU), Flowers Foods Inc. (FLO), So-Young International Inc. (SY)

There was a relatively small batch of economic data for markets to digest this week, which provided some modestly bearish signals. The Employment Index within the Ism Services report dropped further into contractionary territory and Initial Claims came in above estimates, though remain at benign levels. Also within the report, the Prices Index registered the highest level since October of 2022. Here's the breakdown from this week's reports:

• ISM Services: Declined by 0.7% from June to 50.1% and below the 51.0% expected. Within the report, the Employment Index declined 0.8% to 46.4% and the Prices Index increased 2.4% from the prior month to 69.9. This represents the highest reading on the Prices Index since October of 2022.
• S&P Global U.S. Services PMI - Final: Rose 2.8 points to a seven-month high of 55.7.
• Factory Orders: -4.8% vs. -3.5% expected.
• Productivity - Preliminary: 2.4% vs. 2.0% expected.
• Unit Labor Costs-Preliminary: +1.6% vs. +1.7% expected.
• Initial Jobless Claims: Increased 7K to 226K versus last week's 219K, and above the 220K expected. Continuing Claims increased 38K from last week to 1.971M, suggesting hiring sluggishness.
• The Atlanta Fed's GDPNow "nowcast" for Q2 GDP was revised up to +2.5% on Tuesday from +2.3% last week.

Treasury yields ticked up this week, primarily driven by yesterday's poorly received 30-year Treasury auction. Compared to last Friday, 2-year Treasury yields are up ~8 basis points (3.76% vs. 3.68%), 10-year yields are higher by ~6 basis points (4.28% vs. 4.22%) and 30-year yields elevated ~3 basis points (4.85% vs. 4.82%).

Expectations around potential rate cuts from the Fed in 2025 remain elevated following last week's soft jobs report. Per Bloomberg, expectations for a 25-basis point cut at the September FOMC increased to 90% vs. 87%, while the total 2025 expected 25 basis point cuts eased to 2.33 from 2.43 last Friday.

The S&P 500 (SPX) is on track to for a 2.0%+ weekly gain following last Friday's gap down below the 20-day SMA. This week's rebound has been impressive, but from my perspective, last Thursday's bearish engulfing candle is potentially a bearish harbinger until/unless the high from that day is taken out. On that day, the SPX gapped up to an all-time high of 6,427 only to sell off and close near the low of the day. This created a bearish engulfing candle which engulfed the prior five days of trading, and can potentially signal a near-term shift in trend.

Technical translation: intermediate-term bullish, near-term cautious (while below 6,427)

The chart of the S&P 500 Equal Weight Index (SPXEW) looks similar to the Dow Jones ($DJI) in that they both ran up to their prior all-time highs in late July and encountered resistance. For the SPXEW that all-time high level is around 7,610. On a near-term basis however, the index appears to have found support at the 50-day SMA. If the index drops below the 50-day SMA this would be a bearish turn, technically speaking, but if support holds here, it is considered near-term bullish.

Technical translation: near-term bullish above 50 SMA, bearish if SPXEW drops below this indicator

U.S. President Trump signed an executive order yesterday that directed the Securities of Exchange Commission (SEC) to facilitate the use of alternative assets in 401(k) plans. The move will provide an opportunity for millions of Americans to add cryptocurrency and private equity to their retirement accounts. "President Trump wants to give American workers more investment options in order to attain stronger and more financially secure retirement outcomes," the White House stated in a release.

The Bloomberg chart below shows the current % of members within the S&P 500 (SPX), Nasdaq Composite (CCMP) & Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, stocks rallied his week but did so without a corresponding expansion in breadth. On a week-over-week basis, the SPX (white line) breadth dropped to 56.91% from 58.00%, the CCMP (blue line) is essentially unchanged at 40.16% vs. 40.69%, and the RTY (red line) ticked up to 43.15% from 42.33%.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, % of stocks within an index that are above or below a longer-term moving average or new highs vs. new lows.

This Week's Notable 52-week Highs (99 today): Astera Labs Inc. (ALAB + $1.64 to $172.53), Dollar Tree Inc. (DLTR + $0.39 to $117.55), Oklo Inc. (OKLO - $3.16 to $76.16), Palantir Technologies Inc. (PLTR + $4.35 to $186.55), Shopify Inc. (SHOP - $2.83 to $148.24), Wayfair Inc. (W - $0.55 to $72.73)

This Week's Notable 52-week Lows (61 today): Accenture PLC (ACN + $0.52 to $242.24), Bruker Corp. (BRKR - $0.45 to $30.70), Church & Dwight Company (CHD - $0.43 to $92.20), Elevance Health Inc. (ELV + $5.65 to $289.13), Moline Healthcare Inc. (MOH + $3.01 to $158.01), Novo Nordisk A/S (NVO + $1.93 to $50.69)