For Week Ending August 12, 2022
A tumultuous week politically – from FBI seizures, to pleading the fifth – but another big week for the markets with its fourth consecutive week of gains due to lower ‘monthly’ inflation data for July as well as solid earnings reports.
The rumblings of a ‘recession’ seem to be softening. While many are still heavily impacted by the high costs of energy – though falling – and still, the increasing cost of services and food.
The last four weeks of systemic market gains may find some head winds this week and, ultimately, be challenged to break back into bull market territory – which I explore in today’s Chart(s) of the Week. In short, are we rebounding back into a bull market territory or are we in the midst of a bear retracement? More on that below.
Below is your Weekly Market & Economic Update.
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Warmly,
Mark S Sauer
Market Update
Global Equities, Fixed Income & Commodities
Global Equities: Stocks soared higher during the week after expected inflation data came in cooler than expected with the addition of – mostly – solid earnings reports. The S&P 500 was up for its fourth consecutive week, +3.3%, while the Nasdaq rose +3.1%, and the Dow Jones Industrial Average finished up +3.0%. Last weeks growth puts the Nasdaq, this year’s worst performing major indices, is now up around 20% off it’s June low. International stocks gained with Developed Markets growing +2.7%, and Emerging Markets rising +2.5%.
Economic Update
Back to the Bull or Bear Retracement?
Easing Inflation: Producer Price Index (PPI) as well as the Consumer Price Index (CPI) data showed evidence of inflation cooling off for the month of July despite still quite high headline, year-over-year data readings. PPI was 9.8% year-over-year while CPI was 8.5% but down -0.5% in July. The monthly decline was attributable to falling energy prices, which offset monthly increases in services and food prices.
Charts of the Week
Nasdaq Approaches 200-dma
Our first Chart of the Week is the Nasdaq Composite showing the decline through the first half of 2022 followed by a rebound off June lows that has taken us back to a possible retest of the 200-day moving average (red line) which coincides with our bear channel down trend line (purple line). The bounce off the bottom has been marked by sequential higher highs and higher lows, with the breakout above the 50-day moving average (blue line) which provides substantial confirmation that the 2022 bear cycle has been broken, at least for now… The Nasdaq is up more than 20% from its lows, although there is still work to be done to get back to the all-time highs that began the year. Fundamental shifts in the macro economic environment have helped and need to continue in order to push us back above the 200-dma.
Moreover, four consecutive weeks of green are often followed by at least one week of red. We could see the market retest the 50-day moving average before continuing back into bull territory.
S&P 500 Approaches 200-dma
Our next chart is of the S&P 500 and nearly a mirror image of the above Nasdaq chart. I’ll just leave this here for your examination. My comments above apply here as well.
