Good Morning -
Hope everyone had a great long weekend. Starting this month, we’ll be periodically sharing our actionable pre-market plan with all readers. If you’re new to our pre-market plans (sent M-Thurs), they are conclusion-oriented and written briefly. The research assumptions are provided in our daily plan emails’ data section. Our primary focus is Technology (Nasdaq-100). Our secondary focus is the S&P 500 and Hang Seng.
Let’s talk about the setup today. This is a holiday shortened week (which has an upside drift historically). This time though, we are 4 days away from non-farm payrolls, which I believe is the most important catalyst before the FOMC takes place later this month.
To avoid another growth scare, the unemployment rate needs to ideally stay under 4.5%. Any reading higher than 4.5% makes the S&P 500’s forward valuation (23X) vulnerable. For context, the S&P 500’s forward P/E is now within 10% of its all time high valuation at 25.5-26X last seen only in the dot com bubble.
Within this context, recent technical momentum and breadth widening (short/intermediate-term) favor the Bulls while the weakening macro story (long-term) favors the Bears.
We’re currently seeing weakness in the pre-market session with NQ at 19500 (down 100pts) and ES at 5630 (down 25 pts), led by semiconductor weakness. I think rallying from these levels now to close flat for the day would be a very positive outcome. The market is in a state of balance, and it isn’t likely to yet break without the NFP data on Friday.
In the coming weeks, if there is going to be a further market rally, I see NQ as needing to take the lead. ES has been propelled by the Dow and Russell 2000, but many of the Dow names now trade near my Bull Case (see my DCF Table values on the Dow names). Without a further large rally from the Dow, the S&P 500’s next advance will likely have to depend on tech resurgence.
Going forward, we’ll have a 1-2 sentence Mid-Day/Afternoon update in the Substack Chat for members if markets are especially volatile. If markets are functioning normally, stay tuned for our Daily Plan released later throughout the day. DCF Tables and stock projections for the most heavily weighted names within SPY, QQQ, and DIA ETF are located in the Daily Plans.
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