Stocks Drop On August 17 As The Outlook Grows More Ominous

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August 17, 2021

STOCKS – FCX, TSM, BA, F

MACRO – SPY, DXY, HG

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Stocks moved lower on August 17, with the S&P dropping by 0.7% and the Qs falling by around 0.9%. The declines followed a weak Asian trading session and disappointing US Retail Sales. Jay Powell did do a live Q&A session today, but it failed to garner worthwhile market-moving news. Instead, it will leave the market waiting until Powell speaks again at the Jackson Hole Symposium, which will take place on August 26 through 28. It will also leave the market to try and read the tea leaves of the Fed minutes to understand what the Fed’s next move may be when that is released tomorrow afternoon.

Dollar (DXY)

The dollar index may be about to break out from its current consolidation as it again approaches resistance at 93.20. The index has struggled there for some time. Still, it has momentum in its favor. This time, it approaches resistance, not in an overbought or overextended position as it did the last time, with the RSI and MACD both trending higher and indicating a breakout is likely to occur.

Perhaps talk of tapering in the Fed minutes will help push the dollar higher, and a stronger dollar will help the Fed immensely. A stronger dollar will help to pressure commodity prices lower and contain inflation. In fact, at this point, a stronger dollar may be the Fed’s best weapon against inflation. The big risk, of course, is a strong dollar does potentially weigh heavily on global growth.

S&P 500 (SPY)

The S&P 500 managed to fall right to support today at 4,418 and was able to find a bounce off of that level. But more important is that the advance/decline line has really started to show signs of deterioration and has been down 4 days in a row and back to levels not seen since the middle of July.

 

Copper

It is also worth noting that copper had a big breakdown today, falling below a key uptrend that started in March 2020. The breaking of this trend line will need confirmation tomorrow, but if the metal continues to weaken, it looks like it could be a huge blow to the global growth narrative. This is likely to grow worse if the dollar continues to strengthen.

 

Freeport (FCX)

Meanwhile, stocks like Freeport fell sharply today due to weaker copper prices. It has been trending lower in recent weeks and has bearish momentum indicators. The next big support level doesn’t come until $34.60

Ford (F)

Ford got checked off today as successful, falling to my lower target and hitting $12.75. Anyway. (May still be free to read – Ford’s Surging Stock May Fall Following Second Quarter Results).

Boeing (BA)

I’m watching Boeing here as it has been consolidating for some time and is now quickly approaching support at the 2020 uptrend around $210. That trend line is critical, especially with a gap that needs to be filled at $155.

Taiwan Semi (TSM)

Taiwan Semi is probably an essential stock to watch now, as it is nearing a potential break lower with support at $109 drawing closer. I can’t help but think that if one of the biggest semi companies in the world breaks down, it will be a very bad omen for what is to come from the rest of the market.

Have a great night

Mike

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