Weekly Fundamental US Stocks Forecast: Neutral
- Seasonality research going again 20-years present August is usually constructive, with the second half of the month producing the vast majority of features in the course of the month.
- US equity markets can proceed to trade greater within the short-term – at the very least till the Federal Reserve’s Jackson Hole Economic Policy Symposium later this month.
- The IG Client Sentiment Index means thatUS shares have a combined bias within the near-term.
US Stocks Week in Review
It was one other sturdy week for US equity markets, as decelerating value pressures, per the July US inflation report, eased considerations concerning the Federal Reserve persevering with alongside its aggressive fee hike path. The US S&P 500 added +3.24%, the tech-heavy US Nasdaq 100 gained +2.64%, and the small-cap centered US Russell 2000 added a powerful +4.95%. The mixed pullback in short-end US Treasury yields and volatility measures stay instrumental within the rebound transpiring throughout US equity markets – which has formally entered bull market territory (>+20% off the lows).
Seasonality Favors Gains in US Equity Markets
The first two weeks of August have clocked features for US equity markets, according to historic tendencies. Seasonality research going again 20-years present August is usually constructive, with the second half of the month producing the vast majority of features in the course of the month, per information gathered from EquityClock.com.
US S&P 500 Seasonality: DAILY TIMEFRAME (20-year common) (CHART 1)
Source: EquityClock.com
US Nasdaq 100 Seasonality: DAILY TIMEFRAME (20-year common) (CHART 2)
Source: EquityClock.com
US Russell 2000 Seasonality: DAILY TIMEFRAME (20-year common) (CHART 3)
Source: EquityClock.com
With US actual GDP monitoring at +2.5% annualized in 3Q’22 per the Atlanta Fed GDPNow development tracker, coupled with typically constructive earnings (75% of S&P 500 corporations have reported a constructive EPS shock and 70% have reported a constructive income shock, per RealitySet), there may be cause to imagine that US equity markets can proceed to trade greater within the short-term – at the very least till the Federal Reserve’s Jackson Hole Economic Policy Symposium later this month.
Economic Calendar Week Ahead
The flip by way of the center of August guarantees a busy US financial calendar, if not in magnitude of great information releases however in frequency of knowledge and occasions. There are solely two ‘high’ rated releases within the coming days, however the calendar sees a gradual move of knowledge Monday by way of Thursday however.
– On Monday, August 15, the August US NAHB housing market index will likely be launched half-hour after US money equity markets open. June US web long-term TIC flows will likely be reported at 20 GMT.
– On Tuesday, August 16, July US constructing permits and housing begins will likely be printed at 12:30 GMT. July US industrial manufacturing figures are due at 13:15 GMT.
– On Wednesday, August 17, weekly US mortgage purposes information will likely be launched at 11 GMT. The July US retail gross sales report will likely be reported at 12:30 GMT. June US enterprise inventories are scheduled to come back out at 14 GMT. The July FOMC minutes are due at 18 GMT. Fed Governor Bowman will give remarks at 13:30 GMT and 18:20 GMT.
– On Thursday, August 18, weekly US jobless declare will likely be launched at 12:30 GMT, as will the August US Philadelphia Fed manufacturing index. July US current dwelling gross sales information and the July US Conference Board main index are due at 14 GMT. Kansas City Fed President George will give a speech at 17:20 GMT.
US S&P 500 PRICE VERSUS COT NET NON-COMMERCIAL POSITIONING: DAILY TIMEFRAME (August 2020 to August 2022) (CHART 4)
Next, a glance at positioning within the futures market. According to the CFTC’s COT information, for the week ended August 9, speculators elevated their net-short US S&P 500 futures positions to 216,439 contracts, up from the 194,685 net-quick contracts held within the week prior. Positioning is probably the most net-short it has been over the previous 52-weeks, and probably the most net-short because the third week of June 2020.
IG CLIENT SENTIMENT INDEX: US S&P 500 PRICE FORECAST (August 12, 2022) (CHART 5)
US 500: Retail dealer information reveals 35.34% of merchants are net-long with the ratio of merchants quick to lengthy at 1.83 to 1. The variety of merchants net-long is 1.02% greater than yesterday and three.28% decrease from final week, whereas the variety of merchants net-short is 0.73% greater than yesterday and 10.66% greater from final week.
We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-short suggests US 500 costs might proceed to rise.
Positioning is much less net-short than yesterday however extra net-short from final week. The mixture of present sentiment and up to date adjustments provides us an extra combined US 500 buying and selling bias.
— Written by Christopher Vecchio, CFA, Senior Strategist