The market got scuffed up pretty good yesterday, as only three sectors finished higher. What stands out the most is the decline in the three growth sectors, once on autopilot and struggling.

Breadth

It’s difficult to see or detect the broadening of the rally, but new highs to new lows underscore the number of strengths in sectors with limited overall influence in the S&P 500.

Market Breadth	NYSE	NASDAQ
Advancers	936	1,290
Decliners	1,861	2,898
New Highs	156	139
New Lows	16	74
Up Volume	827.05 million	1.85 billion
Down Volume	2.08 billion	3.18 billion

The Utes

Suddenly, 90% of Utilities (XLU) and Real Estate Investment Trust (REIT) components are changing hands above their 50-day moving average. The corresponding action has been the struggle in hot stocks, best illustrated by only 64% of the NASDAQ-100 (NDX) components changing hands above their 50-day moving average.

This is not the place for the S&P 500 bounce to fail. It’s not a given that the August 5^th low has to be tested, but failure to break out will spark near-term selling.

Powell’s Moment

Speculation is that later this morning Fed Jay Powell will offer a road map for Fed rate cuts that will be gradual and methodical.

The market typically reacts positively to a Jackson Hole speech, and there is no reason to believe today would be any different

Very Demanding

The Street is modeling (or hoping) for four Fed rate cuts by Christmas. If Powell goes out of his way to dissuade that narrative, there will be hell to pay for the stock market.

As Jay Powell begins to speak today, the latest on ‘New Home Sales’ will be released. More and more, the examination of housing plays a role in determining just how close the nation is to lurching into an official recession. 

I think most Americans believe we are already in a recession, but when will the experts rubber-stamp it?

Today’s Session

Suddenly, individual investors are extremely bullish. This has served them well, as many professionals, including active money managers, are playing catch up.

Friendly Fed

One reason investors are champing at the bit is that normally the market moves higher when the Fed chair gives the Jackson Hole address.  In 2022, Powell was on a mission to beat the market into submission.  It worked.  I should note, the market has usually been lower weeks later during the Powell Era. 

Fed speakers are already out there preparing the investing world.

A breakout could trigger a short-term virtuous cycle.

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