8/21 Daily Plan: Can the Market Shake off Steep Negative Jobs Revisions?
Any Green Close Today would be Good
Daily Note 8/21:
Going forward in each Newsletter underneath this Daily Note section, I will share the high-level framework that I use to make longer-term decisions. The data in this framework will be updated whenever the macro and valuation data is released. I believe this will be helpful because frameworks can help us stay objective during periods of uncertainty and euphoria. My opinion definitely does not change every day, so the frameworks will be constant guides during periods when I have minimal commentary.
My frameworks are not super complex, and in fact they are rather straightforward & very common sense oriented. It is with this same framework I used to help us navigate the recent bottoming process. The simpler, the better!
As for today’s market session, both the S&P 500 (ES) and Nasdaq-100 (NQ) attempted another rally in spite of the jobs revision data lower. I gave a heads up in the pre-market note on Whatsapp that this data point would cause volatility, but so far, I think the price action is very resilient. If we can close at +.25% or better for both ES and NQ (which is essentially now), I consider today a bullish victory. Closing flat would also be OK.
Closing below -.5% would be less than ideal for bulls as that means we close below yesterday’s lows (beneath yesterday’s black wick), a sign that we’re in balance rather than one time framing higher. You can see this in QQQ ETF below. Essentially, I want to see today’s green candle not close below the bottom of yesterday’s black candle.
Still early in the day, but so far so good.
As mentioned in a previous newsletter note, the 20,000 area on NQ (which corresponds to 484.5ish on QQQ ETF) is the next hurdle to breakthrough.
Today for the first time since July 22nd-23rd we have re-touched this psychological area. The first touch as we saw today was met by Resistance (downward pressure). This resistance had extra fuel because the jobs report revision at -800K (rounding) is at the lower end of the range -500K and -1M jobs revised lower. The market is well off the swing lows from early August, so we need more things to work out “perfectly” with expectations for higher prices to come through.
So this rejection off 20,000 NQ (484 QQQ ETF) is completely normal, I believe.
I think it will take another 1-3 tests to break through it.
The fuel to retest this area will most likely be Jackson Hole (Friday) and NVDA earnings next week.
The short-term picture is positive due to momentum. Longer-term, based on valuation, I recognize there are limits to how far the S&P 500 can rise. One useful cautionary metric is that it is 10% away from Dot-Com bubble valuation levels.
On the contrary, NQ’s Forward P/E is not at an overheated level from a long-term valuation perspective.
This makes sense as many of my Bull Cases on QQQ ETF stocks have yet to be reclaimed.
We have yet to reach any serious euphoric push on the Nasdaq as many of the valuation metrics I look at on FANG and Semi stocks still make sense.
My rating is unchanged until a new (unexpectedly bearish) macro force enters the picture: Hold for Higher.
Members-Only Table of Contents Framework For Making Objective Intermediate-Term/Longer Term Decisions (Shorter-Term Decisions will be discussed separately, when appropriate):