|Best Performer||Worst performer|
|Nasdaq 100||Russell 2000|
The technology-laden Nasdaq 100 was the top performing U.S. index, while the small-cap Russell 2000 was the worst, but the most notable event of the past week was the S&P 500 hitting record highs. The previous intra-week high of 3,393.52, recorded on Feb. 19, 2020, was eclipsed on Aug. 18, 2020 – a span of 126 trading days – making it the fastest recovery from a bear market ever. Furthermore, the index closed the week at 3,397 to confirm the break higher. According to Barron’s, the previous record for a recovery was the “310 trading days from Feb. 9, 1966, to May 4, 1967.”
That said, analysts were quick to caution against getting too optimistic, as “market breadth” was sub-optimal and therefore might not be sustainable. A few of the usual suspects, large-cap stocks like NVIDIA Corporation (NVDA), Apple Inc. (AAPL), Adobe Inc. (ADBE), Alphabet Inc. (GOOGL), and Amazon.com, Inc. (AMZN), with outsized performances fueled by their capabilities to adapt to pandemic conditions, provided the impetus for this move higher. Of note, Apple became the first U.S. publicly traded company with a $2 trillion market capitalization.
Oil, Yields, and Gold
Crude oil (WTI) ended the week down 0.62% despite a fourth consecutive weekly drop in U.S. crude inventories. In normal times, the threat of two potential hurricanes, Laura and Marco, bearing down on the U.S. Gulf Coast would have sent oil prices soaring. However, we are in a period unlike any other in recent memory in that COVID-19 has sent global demand cratering to the point where stored oil supplies are at record levels and are more than sufficient to withstand the expected disruption.
U.S. 10-year and German bund yields ended the week lower, with the latter completely offsetting last week’s rise. The T-note’s yield, on the other hand, is higher than where it was at two weeks ago, likely due to the unexpected opacity in FOMC minutes.
Gold ended the week 0.23% lower but is down 4.23% over the past two weeks. The rise in yields appears to have injected a modicum of risk for interest rate-sensitive sectors and may have catalyzed the precious metal’s correction.
Key Economic Events (next week)
|August 23||6:45 PM||(New Zealand) Retail Sales|
|August 25||10:00 AM||(U.S.) Conference Board Consumer Confidence|
|August 26||8:30 AM||(U.S.) Durable Goods Orders|
|9:30 PM||(Australia) Private Capital Expenditure (quarterly)|
|August 27||8:30 AM||(U.S.) Preliminary GDP (quarterly)|
|(U.S.) Unemployment Claims (weekly)|
|9:10 AM||(U.S.) Fed Chair Powell Speech|
|August 28||8:30 AM||(Canada) GDP (monthly)|
|(U.S.) Core PCE Price Index|
|(U.S.) Personal Spending|
|9:45 AM||(U.S.) Chicago PMI|
Chart(s) of Interest – EURUSD
If the aforementioned EUR/USD correction is truly underway, then moderate support at 1.1695 could be its initial destination. This level has twice rebuffed euro sellers and should prove to be quite formidable again. A clear breach of this could see a quick move down to prior resistance, now turned support levelsat 1.1569 and 1.1495. Conversely, a successful break of the resistance level at 1.1966 (last week’s high) would be needed for the common currency to turn its attention to the psychologically important 1.20 level and beyond.
Pivot Points and Fibonacci Retracement Levels
The pivot point is calculated from the previous trading periods’ price action and can be used to determine the short-term trend. If the instrument on the following period trades above the pivot point, it is thought to be exhibiting bullish sentiment, whereas trading below the pivot point is seen as bearish. The Fibonacci retracement is the potential reversal of the instrument’s original move in price.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.