Hope your weekend went well! Here is a quick recap of what happened in Markets for the Week of August 4th, 2023 and what we are watching for this week 🤓

A risk on sentiment test is what we got last week and needless to say, Bulls failed. It was a huge week of earnings that resulted in stock market losses- Apple (AAPL) and Amazon (AMZN) were the headliners which garnered mixed reactions from investors, propelling shares of Amazon +8.3% higher on Friday while Apple fell -4.8%.

The action this week was driven by a big jump in long-term rates that provided an excuse for investors to take some money off the table in a short-term overbought market. I spoke about what the move in treasury yields mean for markets last week, take a look if you missed it.

The factors that drove the move in rates included supply concerns and the continuation of relatively strong economic data that support the view that the Fed is apt to keep rates higher for longer and may yet find reason to raise the policy rate again.

Here are the key points from last week:

• Bears fight back - after such a HOT July for the Bulls, it is only fair markets cool off, right? The S&P 500, Nasdaq and Dow Jones all had their worst weekly performance since March. Blame it on lackluster forward guidance in earning reports, raising Treasury yields or the downgrade of U.S. debt. Markets short term trendline brokedown this week which means there can be some more selling ahead. I’ll explain this with some key charts below.

• Fitch Ratings downgraded the US government's credit rating to AA+ from AAA; the first downgrade since since 2011! Fitch is a credit rating agency that assesses the creditworthiness of various entities, including governments, companies, and financial instruments. Their role is to evaluate the risk associated with lending money to these entities or investing in their debt.

  - Fitch downgrade means that they believe there is a slightly higher risk associated with lending money to the US government compared to before due to “expected fiscal deterioration over the next three years,” an erosion of governance and a growing general debt burden.

  “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management” - said Fitch

• July Jobs report showed a slight cooldown of the US economy with the unemployment rate at 3.5%, lowest level since 1969. Labor supply continues to be tight, making it difficult to achieve a more Fed-pleasing moderation in wage growth thus fitting the notion that the Fed will keep rates higher for longer.

• The Bank of England (BOE) increased rates by .25 on Thursday, bringing the central bank’s main rate to 5.25% the highest level since February 2008. UK consumer prices were 7.9% higher on a year-over-year basis, compared with 5.5% in the Eurozone and 3% in the US.

• Fed’s Senior Loan Officer Opinion Survey shows stricter credit conditions This survey is used by the Fed to get a view into credit and lending conditions to assist in their decisions to set interest rates and discount rates. The survey this week indicated further tightening across the board, citing stricter credit conditions and an overall decline in the demand for loans. Banks noted that lending conditions will likely continue to get tighter.

$SPY: S&P 500 bear flagged after that big engulfing bearish candle Thursday July 27th (spoke about what caused it here) and closed at its lows Friday testing 446 support. It did break its short term (20 day) momentum trendline last week, so look for it to consolidate and pullback some after a solid June and July. August tends to be a red month on lighter trading volume with investors enjoying their summer holiday.

$QQQ: The Qs are also pulling back after breaking and rejecting their short term (20 day) momentum trendline last week failing to hold 380 support.

$AAPL: Apple had a rough week to say the least closing down over -7% after reporting lighter-than-expected iPhone growth and Q3 earnings guidance. It not only broke its short term momentum trendline but also its 50 day moving average, closing at its lows Friday at $182. Apple is BIGGEST weighted component of the S&P 500 at 7.6% so this may setup as a guide on what’s to come for the index. Will Bulls step in to buy this discounted pullback or is more selling pressure ahead? We’ll find out this week.

Swing Trades Recap 📊

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(Blue arrow is our buy alert, red arrows are sells as price targets get hit)

As we discussed last Monday during our office hours zoom meeting, market sentiment and momentum has shifted risk off so we got stopped out on some of our ongoing swings last week.

$IMGN We sold the remaining size at $17 as it looks to trade lower after losing momentum for +18% gain 

$CVNA We took some more profit on Carvana as it traded to retest $50 for +315% gain from our $12.06 entry back on May 23rd.

$UPST we sold 10% of our swing trade in Upstart this week as it tagged our $70 price target for +257% gain. UPST triggered a swing entry at $19.78 back on May 17th.

*None of these stocks above are recommendations to buy, sell or trade. We do not give financial advice, you should always do your own due diligence and practice proper risk management.*

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See you next week! 👋