It’s tempting to ignore the markets over the next two weeks, as those days are traditionally some of the weakest trading days of the year. But there’s still a strong rally going on. CNBC’s Robert Hum told me that both the S&P 500 and Nasdaq Composite have risen for eight straight sessions — the longest rises since November of last year for the S&P 500 and since December for the Nasdaq. The S&P is up 7% over the past eight trading days. That would be its strongest eight-day winning streak since the nearly 12% rally in March 2003. Another positive: Market breadth (stocks rising vs. falling) is on a tear. Lowry, the nation’s oldest technical analysis service, noted Friday that the New York Stock Exchange’s up/down line hit an all-time high on Aug. 15. That’s one of the best technical signals you can get. It’s hard to argue that there’s a market top when the up/down line has hit an all-time high. Markets Now It’s that time again on Monday: 2:1 upside for falling stocks on the NYSE and S&P 500 up 25 points. Tech stocks are lagging, but defensive stocks are strong elsewhere, led by real estate, healthcare and consumer staples. The rally in tech stocks appears to have stalled. Big-cap tech stocks are mixed today, with particular weakness in semiconductors. There’s a pretty wide spread among big-cap tech stocks this month, with Meta and Nvidia gaining, Apple flat, and Alphabet and Amazon both falling mid-single digits. Megacap Tech Stocks This Month Meta +11.2% Nvidia +6.0% Apple +1.0% Alphabet -3.6% Amazon -5.0% Where Are We? On the positive side, the soft landing scenario is still intact: economic data shows a slight slowdown but jobs growth IS still strong, the Fed is expected to begin cutting rates in a few weeks, and earnings have been remarkably stable even as some companies are under pricing pressure. Perhaps most importantly, recent volatility in early August led to a significant unwinding of many crowded trades, including parts of the yen carry trade, which may help make markets somewhat less volatile. Positive Market Aspects Economic data supports growth Fed easing expected Earnings stable Partial unwinding of crowded trades On the negative side, the next two weeks, with the exception of the week after Christmas, are the lightest volume days of the year, when volume typically drops 20% below average. Additionally, September through October remain some of the worst months of the year. Finally, valuations are still very high, leaving little room for error, although earnings growth expectations remain strong at around 10% this year and 15% next year. Negative market aspects End of August: Traditionally low volumes September to October difficult months High valuations: little room for error
