August 31, 2022
Good morning,
It sure is hard to find a Bull – anywhere. While such extreme sentiment is not enough of a reason to buy, it does suggest we are probably not facing another waterfall decline as we head into September – the worst performing month historically, and the only month showing negative average performance for all the major benchmarks over the past 30 years – ugh. BTW – August is the second worst (chart below).
Recall the bearish short-term overbought condition of the market cited two weeks ago. As you would imagine, the sell-off since last Friday’s Jackson Hole speech has corrected any hint of over-bought signals anywhere. In fact, the same indicator is already about to signal over-sold. Again, no reason to celebrate but it does calm fears of imminent lower lows.
However, even if the likelihood of another waterfall decline has dropped, it doesn’t mean that September won’t see increased volatility. There is August’s employment data this Friday, and Chair Powell is speaking again on 9/8, just before the Fed quiet period begins. Then there is inflation data five days later (in the quiet period), and then the September Fed meeting with another rate hike to close out the month.
My Morning Note will be back next Tuesday – enjoy the long weekend, ahead of what could be a challenging month.
Be well,
Mike