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Today’s Summary
Wednesday, August 31st, 2022
Indices: Nasdaq 100 -0.57% | Russell 2000 -0.62% | S&P 500 -0.78% | Dow -0.88%
Sectors: 2 of the 11 sectors closed higher. Communications led, rising +0.24%. Materials lagged, falling -1.23%.
Commodities: Crude Oil futures dropped -3.04% to $88.85 per barrel. Gold futures fell -0.78% to $1,723 per ounce.
Currencies: The US Dollar Index fell -0.12%.
Crypto: Bitcoin rose +1.99% to $20,214. Ethereum gained +3.46% to $1,575.
Interest Rates: The US 10-year Treasury yield rose to 3.196%.
Here are the best charts, articles, and ideas being shared on the web today!
Chart of the Day
Bear markets tend to be back-end loaded, with the largest declines coming in the last third (of time duration) 11 out of 16 times, with the average decline in the last third double that of the 1st or 2nd third. Of course we don't know duration ex-ante. pic.twitter.com/vvY0bWsFHn
— Nick Reece (@nicholastreece) August 31, 2022
Today’s Chart of the Day was shared by Nick Reece (@nicholastreece). Billionaire trader, Paul Tudor Jones once famously said; “There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market.” Nick gives us a more empirical representation of what PTJ was talking about. Looking at all bear markets since 1929, he notes that the final third was the most painful 11 out of 16 times, or 69% of the time. The average decline in the final third is double that of the first or second third, and about equal to the first two-thirds combined. It’s impossible to tell which third we’re in now, but this data makes sense given that bear markets often end with capitulation. Have we seen the final puke yet?
Quote of the Day
“There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market.”
– Paul Tudor Jones
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Top Links
September’s First Trading Day Leans Bearish Last 14 Years – Almanac Trader
Jeff Hirsch examines how the major indices have historically performed on the first trading day in September.
September Seasonality: Mega-Caps – Bespoke
Bespoke points out that September hasn’t been a good month for the five largest stocks over the past decade ($AAPL, $MSFT, $AMZN, $TSLA, and $GOOGL).
XLE, How Much Money to Invest in Thee? – East Coast Charts
Louis Spector assesses the risk and reward of buying the Energy sector here.
Junk Bonds Selloff Keeps Bears in Charge – Kimble Charting Solutions
Chris Kimble examines the weakness in Junk Bonds.
The Best Part of Waking Up – All Star Charts
Ian Culley looks at the continued rise in Coffee prices and how to take advantage of it.
Top Tweets
Stocks ?4%+
Bonds ? 3%+Another awful month for stocks, bonds, and 60/40.
— Bespoke (@bespokeinvest) August 31, 2022
Bad news?
The S&P 500's worst month of the year has been September based on average returns historically.
More bad news??
The last four times when the S&P 500 fell 10% or more YTD through the end of August, it also dropped 8% or more in September.
— Callie Cox (@callieabost) August 31, 2022
Noted this at the start of the month, but when stocks are down in August, they are really down.
No month has a worse avg. when it is lower than August.
S&P 500 down 4.2% this August fits right in unfortunately. pic.twitter.com/D9qZU6i2kV
— Ryan Detrick, CMT (@RyanDetrick) August 31, 2022
The S&P 500 is down 17% in the first 167 trading days of 2022, the 5th worst start to a year in history. $SPX pic.twitter.com/MVP8igWlsF
— Charlie Bilello (@charliebilello) August 31, 2022
Today the Dow Transports joined the Dow Industrials below its 50-day moving average. pic.twitter.com/J2uH9XNM9i
— Louis Spector (@EastCoastCharts) August 31, 2022
In a bull market phase, stocks/ETFs will become overbought on upswings and the RSI pulls back to around 40 on downswings. In a bear market phase, 40 does not hold which indicates excess downside momentum. RSI for $SPX $SPY right at the 40 level… pic.twitter.com/5uZikPSNju
— David Keller, CMT (@DKellerCMT) August 31, 2022
Small Caps $IWM retesting trendline. Tests can pass or fail. TBD. pic.twitter.com/8wzs2Kem6t
— Chris Ciovacco (@CiovaccoCapital) August 31, 2022
Which way do these resolve?
The reflation highs from 2018 represent an important level for a lot of cyclical risk exposures$IWM $XLF $XTN $TIP $IEF pic.twitter.com/7ahQDTHwcp
— Mike Singleton, CFA (@InvictusMacro) August 31, 2022
The US 2yr yield is slightly above its 2018 highs. Will the rest of the curve follow? pic.twitter.com/PWYtrw0ueA
— Alfonso Depablos (@AlfCharts) August 31, 2022
$HYG chart is junk
Getting very close to its June low. Is this the tell? pic.twitter.com/RZ1WF3Qk0u— Mike Zaccardi, CFA, CMT (@MikeZaccardi) August 31, 2022
All Leo jokes aside, this is one of the best data visualizations I’ve ever seen pic.twitter.com/ndhbMxao3u
— Matthew Kobach (@mkobach) August 31, 2022
You’re all caught up now. Thanks for reading!