- The reset and inflation of the CPI in the US spoils the outlook for the stock market.
- Tesla, Goldman Sachs, Netflix and Snap will go public next week.
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U.S. stock markets fell and then rallied sharply on Thursday after the latest U.S. inflation reading came in higher than expected. The current consensus on the move is that market participants were heavily shorted from the release, and that after the initial sell-off, buyers seemed to start covering shorts and believed that covering was becoming difficult and expensive. The Nasdaq 100 fell about 500 points before rallying more than 700 points, while the S&P hit a low of 3,490 before ending the session near 3,680. It remains to be seen whether these gains can be sustained in the coming days, especially if companies will start publishing their earnings for the 3rd quarter.
Next week’s earnings calendar is pretty packed with some great names opening their books. Bank of America ( BAC ) releases before US markets open on Monday, Goldman Sachs ( GS ) ahead of trading on Tuesday, along with Johnson & Johnson ( JNJ ) and Netflix ( NFLX ) releasing numbers after the close. Tesla ( TSLA ) reports after the market close on Wednesday, while SNAP ( SNAP ) reports after the close on Thursday. A mixed bag of heavyweight names – especially JNJ and TSLA – all of which can change market sentiment and price. The US economic calendar next week is fairly light, with Q3 releases as the main drivers.
The daily chart for the Nasdaq 100 remains negative despite Thursday’s rally. A series of lower highs and lower lows remains in place, while all three simple moving averages weigh on the index…
Nasdaq 100 – daily chart
… while the S&P 500 has a very similar sentiment to the Nasdaq.
S&P 500 – daily chart
Retail trader data shows that 61.33% of traders are net long with a long to short ratio of 1.59 to 1. The number of net long traders is 10.90% lower than yesterday and on 2.22% lower than last week, while the number of net-short traders is 7.60% higher than yesterday and 6.34% lower than last week.
We generally take a contrarian view on crowd sentiment, and the fact that traders are net long suggests that prices may continue to fall below $500. The position definition is less clean than yesterday, but better than last week. The combination of current sentiment and recent changes gives us a further mixed trade bias of US$500.
customers pure long.
customers pure short.
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What is your view on US indexes – bullish or bearish?? You can let us know via the form at the end of this piece or contact the author via Twitter @nickcawley1.