We noted the potential of a sell off in August based on resistance levels from the strong negative trend which began in 2022. The resistance we marked on our charts did turn the market lower until support levels were hit. At this point participants are likely confused as to whether to buy the dip or sell the rally.
Adding to the uncertainty is the US dollar staging a strong rally, Treasury bonds attempting to bottom, and a significant movement higher in the oil market.
The August peak in the S&P was significant, and a retest and rejection would confirm the area of resistance. September and early October have a well-known seasonality effect that can drag the markets lower, but nothing repeats perfectly.
We believe the selling will continue in the near future, but there remains a good chance of a rally towards the end of the year to challenge the August highs.
Recent Program Performance
Volatility did resurface in August for a short period. The Diversified intraday program was relatively inactive, with winning trades that were buffeted by small losses.
The Overnight Advantage program attempted a long trade which was exited with a loss before a steep sell off began. Much of the month was spent safely in cash.
We see a trader's market rather than a buy and hold environment. There are momentum plays in the equity market that appear to be bucking the trend. The industrial sector in particular is standing out.
The majority of S&P companies are reporting positive revisions to their forward earnings, so fundamentally the US economy appears to be intact. This does not mean that US markets will remain strong as participants price in a rising interest rate environment.
Sam Beckers and Dario Michalek
Soaring Pelican, LLC