Fed Helps the Rally: How Long Can It Last? Spotlight on Banks & Biotechs!
Fullhapce Intelligence employs artificial intelligence and physics-based models to analyze market trends for swing traders, providing comprehensive reports and analysis on a daily, weekly, and monthly basis. Investors should be aware that our sector analysis may experience rapid changes due to the dynamic nature of swing trading, with 'short-term' referring to a period of several days in this context. Investors need to recognize that what is presented in this video and a long-term value investing strategy are of a very different nature. Fullhapce Intelligence disclaims responsibility for the results of any investments made.
This video data is as of August 23, Friday.
Howdy, swings!
As we predicted yesterday, the Federal Reserve Chairman's speech helped the markets.
Despite the previous day's decline, the market fared better overnight in anticipation of Friday's gains.
Even though the market rose a bit more after the speech, the market only made it to the previous highs, below the S&P 5650 level despite the Fed Chair's supportive comments.
Is it possible for the market to break through the resistance level and reach a new high at this time?
Let's take a look at Fullhapce’s Daily swing market forecast to get some answers.
Daily Market Index Movements.
The overall market experienced an increase.
The VIX decreased by more than 10%.
SNP 500: 5634.61, 1.15% up.
Dow Jones: 41175.08, 1.14% up.
NASDAQ: 17877.79, 1.47% up.
Russel 2000: 2228.0, 3.18% up.
Vix index: 15.79, -10.03% down.
Let's see the Daily sector performance.
Banks, semiconductors, housing/building materials, travel/leisure, real estate investment trusts (REITs), autos, energy, solar, and general materials performed well.
Technology, insurance brokers, exchanges, certain healthcare sectors, auto parts retailers, consumer staples, and utilities underperformed.
Here are The reasons.
People expected a moderate tone from Powell's speech, but he leaned even more towards easing concerns, particularly about inflation.
Powell suggested that fighting inflation might be somewhat successful and shifted focus more towards reducing unemployment.
His speech at 10 am seemed to positively influence the stock market and government bonds, while the dollar value fell to its lowest in a year as people anticipate a possible reduction in interest rates by the Fed.
Here are the Things to consider.
At a today's event in Jackson Hole, Fed Chair Powell's comments were somewhat more relaxed than expected.
The European Central Bank is hinting that they might reduce interest rates at their upcoming meeting on September 12.
The BOJ Chief, Ueda, mentioned during his testimony that any adjustments to tightening policies would be approached carefully to avoid major market disruptions.
Japan saw a decrease in its core national CPI in July compared to June, which might lessen the urgency for the Bank of Japan to increase interest rates significantly.
In the U.S., sales of new homes in July were notably higher than anticipated, with a revision upward of June's sales figures as well.
The U.S. National Security Advisor, Jake Sullivan, plans to visit China soon to meet with Beijing’s Foreign Minister.
Today's earnings reports released on Thursday evening were generally good.
Here we present the Daily Market Forecast for swings.
The overall weekly market has shown strong upside potential, but hasn't made much progress since last week.
The daily market has shown weak upside potential over the past four days, with volatility at critical points.
Today, the market closed higher but ran into significant resistance below the 5650 level, which is significant because it was unfounded and strong resistance after a favorable speech by the Fed Chairman that limited the market's gains to the previous highs.
Traders should be wary that something we don't know is exerting downward pressure on the market, and over the next few days, the market could see significant volatility as bulls and bears battle it out between 5550 and 5650.
We have noticed that the financials and biotech sectors have not had a adjustment yet, so we expect the financials to drop around 2% sooner or later, and the biotech sector will likely be similar.
Due to the current weakness and high volatility, there may be some downside on Monday, but attempts to recover are expected to be strong.
Therefore, if a financial and biotech correction occurs on Monday, the S&P could close down about 1%; otherwise, Monday could close higher.
The weekly market is expected to continue its upward trend after the adjustments in the financial and biotech sectors, but not as sharply as in early August, but more gradually.
Here are some additional insights.
The factors that have been increasing stock prices still seem to be active, suggesting that stock prices might continue to go up.
Expectations for company profits are quite high, which might be hard to meet.
The cost to buy stocks is still considered high, meaning they may be priced more than their actual value.
Let's see the Devil's Advocate.
The opposing scenario is that the market could fall below the S&P 5450 level.
In this case, it might be wise to consider waiting for the market to reach the bottom before deciding on your next steps.
The rationale for this scenario is as follows.
This week's financial news has been somewhat cautious, though many investors seem to anticipate that central banks like the FOMC and ECB might implement measures to relax monetary policies somewhat.
The Federal Reserve is paying close attention to the labor market, which appears to be showing signs of strain, potentially indicating that economic growth might face challenges ahead.
A today's research paper released in connection with a conference in Jackson Hole suggests that the job market might be approaching a critical point where unemployment could increase.
The Bank of Japan (BOJ) hinted it might continue making its monetary policy more standard, which could lead to disruptions linked to international finance and investment strategies.
In the realm of U.S. politics, neither Kamala Harris nor Donald Trump have proposed economic or fiscal policies that seem likely to significantly boost the financial markets.
While there is merit to the contrarian scenario, we think a sharp drop is unlikely as the big uncertainty has just been cleared up by the Fed Chairman's speech and there are no major events until Wednesday's NViDiA earnings report.
Nevertheless, viewers need to be wary of concerns raised by the other side.
Our Conclusion is as follows.
According to our calculations, the weekly market is rallying steadily, but the daily market is likely to be dominated by volatility, with the S&P oscillating wildly between 5650 and 5550.
Given the fact that today's rally ran into strong resistance and paused at the all-time high, and the impending correction in the financial and biotech sectors, Monday's outcome will likely depend on whether or not the financial and biotech sectors correct.
Once those adjustments are over, the market could continue to rise, but it could be a gradual and steady rise rather than a sharp rise like we saw in early August.
As such, it may be wise for traders to remain optimistic, but take some profits and pay more attention to asset protection.
Traders may be prudent to consider both out main forecast and opposition scenarios to manage risk effectively.
Thank you for watching.
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