August 6, 2020
Stocks – WDC, MU, NFLX
Macro – SPY, COPPER, DOLLAR, YIELDS, GERMANY
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Futures are trading lower today after trading higher last night. To this point, the S&P 500 has been unable to move beyond yesterday’s highs. At least, for now, that region around 3325 continues to be the level that needs to be watched. We can see that a large wedge pattern has formed in the futures, and that could be pointing to a pullback here, of what could be fairly sizeable. It may even result in a pullback to the 2950 -3050 level. To avoid this fate, we need the S&P futures to take out the highs around 3,340 and push higher to 3,390.
Perhaps, they will get a shove in either direction following initial claims at 8:30 am.
We can see that a similar pattern has formed in the German Dax, and that index has already started to correct.
Copper prices have been struggling recently, and those struggles have come despite a massively weaker dollar. We can see that the RSI is now trending lower, and that is indicating lost momentum, and the potential to fall back to the trend line at $2.66.
The dollar is at a very important here, and so far, it is holding support at 92.50. That level needs to hold; if it should break, the dollar index is heading even lower, perhaps to 88.50. The twist here is that if the dollar starts to strengthen, that will weaken copper prices, which will potentially breakdown the risk-on trade. So the dollar price action here really matters more than you might think.
The dollar is now showing genuine signs of a base being formed, with an RSI reversal in the works. It doesn’t mean that the dollar index can’t fall further; it just means a reversal of trend is underway.
Keep watching the 10-year; it tells a different story than the equity market. Remember, when it comes to economic, the bond market is far smarter.
Western Digitial caught a few downgrades today following the weak results. The stock for now found some support around $38.40, and that level will need to hold to avoid a further decline to $35.35.
Micron also saw a price target reduction at Cowen today, to $60 from $65. I still think the stock heads lower towards $45.50.
Netflix keeps growing closer to the uptrend, but every time it gets it there, the stock bounces higher. That trend has great importance and needs to hold.
That’s all for now
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