🍔Jobs Just Killed the Stock Market

Bloodbath in economic data, FOMC aftermath, and wild Tech earnings

Hello Investors,

A lot has happened this week in the US stock market. Apologies for not posting sooner, we wanted to spend extra time analyzing the market and recommending what to do next.

We made big changes to our portfolio to protect against losses. Our strategy is working exactly as intended. Not only have we protected on the downside, we didn’t get lured in by the trappy FOMC rally on Wednesday.

Times like these can be scary for traders and I want to make sure our readers have the best info. Having been managing money professionally for nearly 15 years, I’ve seen this play out before. My predictions are at the end of this letter in the premium section. And they are radical.

Topics inside: Big week for economic data, FOMC meeting and aftermath, Tech earnings (Microsoft, Meta, AMD, Arista Networks, Amazon, Apple), hedge fund positioning, technical analysis, IWM and QQQ, what it all means.

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Week in review

This week we saw a continuation of the S&P500 and Nasdaq selloff that started July 17. Recall our magic indicator caught the top of the market and warned us of impending weakness. We then went to 30% cash on the first break of trend and avoided a lot of the drawdown in SPX. Paid subscribers get our signals in real time as they occur.

Wednesday we had the FOMC meeting when the Fed held rates steady as expected. This sparked a >2% rally in the SPX and QQQ. The IWM rallied but could NOT hold onto gains - our first indication that something was wrong. Though we are bullish on IWM, our signals did not confirm and that kept us out of the trade.

Thursday, the SPX and Nasdaq reversed the entire FOMC rally. This was our second indication that something was wrong. We’ve seen this pattern before (big event-driven rally, immediate reversal the next day) and knew to stay out of it.

In last week’s letter (check it out, its' free until Aug 11!) we gave two scenarios for the SPX. Though we favored the rebound scenario, the selloff scenario occurred instead. Below we discuss what that looked like and how we traded it.

The market continued to selloff on Friday and was down another >2%. This was a reaction to very weak economic data. We debate this, especially the jobs numbers, in the premium section — and the result might surprise you!

SPX is now down -6% from its peak and Nasdaq down -12%. We’ll talk about whether this is oversold, including in-depth technical analysis (not just drawing lines on a chart!). As a portfolio manager with nearly 15 years of screen time, I’ve seen these cycles before and I can tell you what comes next.

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Happy trading!