In this post, I’ll focus on setups that I’m monitoring for both long and short positions. With a chart and short write-up, this is a quick way to scan and plan potential trades.
These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.
Stock Market Update
An August payrolls report that smashed expectations is adding additional uncertainty over the Federal Reserve’s next move on interest rates. Nonfarm payrolls added 162,000 jobs last month which was triple the 53,000 expected. The prior two months were also revised higher by a combined 55,000. The report came a day after influential Fed Governor Christopher Waller favored keeping rates steady in September assuming no big surprises in next week’s inflation reports. But evidence of a strong job market coupled with inflation that’s ran above the Fed’s 2% target for over five years will put pressure on the Fed to act. The 2-year Treasury yield that tends to lead changes in the fed funds rate now sits 62 basis points above the current upper fed funds target, implying the bond market expects at least two rate hikes ahead (chart below).
Major stock indexes pulled back slightly after the jobs report, with stocks recently rallying on hopes of the Fed holding rates steady versus pulling back when odds for a hike increase. While the knee-jerk reaction is centered around the rate outlook, it’s worth keeping in mind that good news for the economy should be good news for corporate earnings. The jobs report adds to recent data pointing to an economy expanding at solid pace, which should support the bull market looking ahead. Over the near-term, stocks are just starting the worst month of the year for calendar seasonality while volatility should be no surprise heading into midterm elections. It’s worth noting that we’re seeing a deterioration in breadth, with the cumulative NYSE advance/decline line pulling back in the chart below.
While the average stock is pulling back, it’s interesting to note that the market’s biggest stocks including the Mag 7 could be setting up to take the lead again. I’ll have more on that in our chart breakdown for trade ideas below.
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