5 Things I’m Watching This Morning

1. Premarket Thoughts: After Wednesday’s close, NVDA gapped up after reporting another very strong quarter. That sent Nasdaq futures a slew of tech stocks higher. The key now is to see if it closes higher and we continue to rally. At this point, the bulls want to see the major indices close above their respective 50 DMA lines this week. If we can close above that level by Friday that will be a bullish sign. Conversely, if the market rolls over here then the 50 DMA line will become resistance (a.k.a. the market will hit a wall there) and then we can roll over. Last Friday’s low is near term support for all the major indices.

2. Weak Follow-Through Day: Wednesday was a weak follow-through day. The Nasdaq 100 (QQQ
QQQ
) was the only index that scored a FTD. The Nasdaq Composite did not because volume was lower than Tuesday’s session. The other indices did not rally over 1.5% on Wednesday. That doesn’t mean that this rally attempt will fail. It just means that it is a weak FTD.

3. Selective Offense: I’m still playing selective offense. I’m slowly buying and will only add more if the market rewards me. Meaning, my stocks go up! If the market closes lower today or we just roll over then I will be out very quickly for a small loss or breakeven. Until we get – and stay- above the 50 DMA line, my trust is very low for this rally. Watch The Semiconductors: The last time NVDA gapped up that ignited a huge rally in other semiconductors. I will be watching to see where they close today. Separately, MRVL reports after the close today and that could easily gap up as well.

4. Jackson Hole: The Fed is the proverbial elephant in the room. Fed Chairman Jay Powell is going to speak tomorrow morning and his Jackson Hole speech in the past has moved markets. It’s worth noting, three years ago, the Federal Reserve introduced the Flexible Average Inflation Targeting framework, which fundamentally changed their outlook on inflation from a target of 2% to having inflation run higher and having an average of 2%. That was a big mistake and opened the door for the rampant inflation we saw and are still seeing in parts of the economy. The trade-off at the time was simple, we can tolerate higher inflation for accelerated economic growth and stronger employment. That’s why we didn’t get a big recession (a.k.a. hard landing). Going forward, it will be very interesting to see if the Fed changes its stance and goes back to the target of 2% or if it is willing to allow higher unemployment to achieve a 2% inflation rate? The market knows the Fed’s back is against the wall. Of course, all this talk takes a back seat to how the market reacts to to the news. I’m just sharing some early thoughts with you.

5. Early Gappers:

Up: NVDA, SMCI, GES, SPLK, GRPN, EHAB, ADSK, SNOW,TUYA, TSM, ZAPP

Down: OIG, SPR, BA, NTES,NEPT, MULN, ZUO, HBB

Final Thought:

Let’s see where we close today.

A strong close in the upper half of the range = bullish.

A weak close in the lower half of the range = bearish.

Have a great day!

Adam