So today is the monthly inflow day, which could help keep things afloat, but really not much has changed since Monday with very muted trading action Tuesday. The S&P 500 finished the day 13 bps lower in a market that seems completely blind or naïve to what is coming its way over the next few months.
First, there was that terrible China PMI report that suggested that the service economy in China slowed dramatically. Couple that with a Fed and ECB that are likely to very soon start tapering asset purchase, which, when completed, would remove about $220 billion per month of liquidity from global markets. The market literally has shown no concern at this point. Together with a US economy that is moderating very quickly, and one has to wonder how much longer this circus can continue.
Whether that changes or not, we will soon find out because Wednesday kicks off a deluge of economic data in the US with the ADP job report and the ISM manufacturing report. Then on Friday, we will get the BLS Job report and the services ISM report.
This will tell us a lot about where the Fed goes next and I don’t see how the Fed doesn’t start the tapering process soon. The economically sensitive parts of the equity market have shown little to no improvement in recent weeks. The Dow Jones Transports fell by almost 1.2% Tuesday and could be forming a double top pattern, indicating the index falls further.
Housing
The housing index finds itself positioned very similarly, with nearly identical bearish trading patterns.
As I have mentioned before, this reminds me of what we saw in 2018, with many similarities, especially when looking at the technical and fundamental trends. (Now Free – The Equity Market Appears to Be on A Path Similar To 2018 – 7.31.21)
NASDAQ 100 ETF
The Invesco QQQ Trust (NASDAQ:QQQ) ETF was still overbought, with minimal improvement from Monday's levels. More needs to be done here to get the index off these overbought levels.
Micron
I was surprised to see Micron Technology (NASDAQ:MU) rise Tuesday, especially with a report out of Digitimes that said DRAM spot prices were falling rapidly. The 20-day moving average was still holding as a resistance zone, and if DRAM prices continue to fall, I don’t see how this stock does keep falling.
DoorDash
DoorDash (NYSE:DASH) had a clear bearish divergence taking place with the RSI trending lower and the price trending higher. The MACD was also trending lower, and the stock was at the upper end of the Bollinger® Band, suggesting the shares were overbought.
A pullback to the lower Bollinger® Band around $178 would certainly test the uptrend in the price. Overall, the pattern didn't look all that bullish at the time. However, someone sold about 10,000 of the $165 September 17 puts and collected a premium of $0.93 on Aug. 30, so the downside was probably limited to that $165 region for now.
DocuSign
I haven’t looked at DocuSign (NASDAQ:DOCU) in a long-time, and the stock has really run-up. They report this week, and in many ways, I think the stock is positioned like Zoom Video Communications (NASDAQ:ZM). An insanely high valuation that is hard to justify given projected growth rates.
The pressure will be on for a big beat and strong guide looking forward. As long as the 50-day moving average holds, all should be ok; watch out if it breaks support—it could be a very long way down.
Comcast
Comcast Corp (NASDAQ:CMCSA) had a big move up, and it looked like it broke out on the RSI Tuesday. Maybe it finally pushes up to $68.
