/ August 11 / Weekly Preview
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Monday:
N/A
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Tuesday:
Core Inflation Rate YoY (3% exp.)
Inflation Rate YoY (2.8% exp.)
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Wednesday:
N/A
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Thursday:
PPI (0.2% exp.)
Initial Jobless Claims (226K exp.)
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Friday:
Retail Sales MoM (0.5% exp.)Industrial Production MoM (0% exp.)
Michigan Consumer Sentiment Prel (62 exp.)
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Monday:
Barrick Mining Corporation
monday.com Ltd.
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Tuesday:CoreWeave, Inc.
Tencent Music Entertainment Group
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Wednesday:
Cisco Systems, Inc.
KB Financial Group Inc
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Thursday:
Applied Materials, Inc.
Deere & Company
JD.com, Inc.
Tapestry, Inc.
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Friday:
Flowers Foods, Inc.
Cracks Form Beneath the Surface
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During the past week, we’ve had our fair share of trade policy shocks, monetary policy announcements and earnings calls to digest. Investor sentiment jumped around, but finished on a positive note by Friday, recovering from the Aug 1 through.
President Trump announced sweeping “reciprocal” tariffs (especially on Indian imports) and applied additional pressure to the semiconductor and pharma sectors. In theory, we should have gotten a more defensive minded market, but Apple’s announcement of a $6B infrastructure spending plan in the U.S. boosted the major averages. It seems that Trump’s plan to incentivise domestic production is working, at least if we take these statements at face value.
The positive response in Apple’s stock sent the Nasdaq soaring to a record close. Trump also nominated Stephen Miran to the Federal Reserve, signaling a more dovish tilt to interest rate policy (possible rate cut expectations have increased).
The BoE already delivered a 25-bps cut to 4% for the pound sterling, but the vote was tight (5-4). It seems like every major Central Bank is facing internal division about the path of interest rates at the moment.
Looking at corporations, earnings season is winding down as Q2 provided reasons for both support and disappointment. Generally speaking, EPS beats received a muted response, while misses were heavily punished. In a market priced for perfection, such can be the case: companies beating estimates only outperformed by 55 bp vs. the 101 bp historical average.
Updating our Q3 seasonal analysis from last week reveals a resilient market especially compared to many previous SPY performances during the same period. In just 2 years of the past 10 did SPY ever register a better track record so far (2023 and 2022). Both of those high performing years went on to record end-of-quarter upside of +10.53% and +9.66% respectively. Given that 2025 is now tracking at +7.82%, there appears to be limited upside, at least from a seasonal perspective.
SPY Performance June 01 - September 30 vs last 10 years - via Market Study instrument, now live
Technically speaking, the market was close to “breaking” in the short term, following a 20-DMA violation, but bulls showed up and provided support. We would point to prevailing positive GEX conditions and Apple’s influence on the near-term direction of SPY’s price. The price action was choppy, however.
Resistance is now looming at $637 (M-Trend), just above the last close, while meaningful support resides at $615 (50-DMA). Despite the pullback, the market’s longer-term structure remains constructive, with healthy retail as well as some institutional support. The recent dip was rather a symptom of consolidation than a real correction. So far in 2025, retail traders have been able to step in and buy all of the dips.
Nevertheless, a full 50-DMA re-test (implying a -3.37% drawdown) would not be surprising over the next couple of weeks.
Again looking at market structure, the only issue currently is a distinct lack of participation among most stocks. Fewer than 60% of the top 1000 stocks are now trading above their 50-DMAs, highlighting the reliance on mega-cap technology to prop up index levels.
META (green) and MSFT (grey) lead the recovery from the April lows, while AMZN (orange) and AAPL (teal) struggle in 2025;
Going forward, traders will focus on a couple key catalysts this week, including:
CPI and PPI, both of which play a crucial in setting Fed policy
Retail Sales and Industrial Production, giving us a better read on U.S. demand and production figures
According to real-time inflation tracker Truflation, there is little pressure on prices coming up. Their estimate is now just +1.78% near the lower end of YTD figures.
While the inflation projection data looks good on the outside, it may be taken as a sign that the economy is slowing. Nonfarm payrolls increased by a mere 73,000 jobs vs 110,000 expectations. The revisions were outright horrendous: May and June payrolls were slashed by 258,000 — the second-largest two-month downward revision since the 2008 recession.
As far as signals go…. this is “no bueno”, as they say. Since consumption is derived primarily from employment income, the economy needs higher full time employment in order to generate higher consumption expenditures. With the job market steadily losing momentum and consumer sentiment deteriorating, it’s getting harder and harder for individuals to consume at higher levels.
After the most recent batch of Q2 earnings data, it’s becoming evident that without Megacap Technology and major Wall Street banks, there would have been no earnings growth in S&P 500 companies.
Our Trading Strategy
We need to remain nimble in our approach, as we are noticing a divide between the economic fundamentals underpinning this market and the technical strength apparent at the index level of the market.
While factors such as seasonality, corporate buybacks and the perspective of lower interest rates keep the bullish narrative alive, evident cracks are showing up in economic indicators. This is the time when our macro models are the most helpful, as they already integrate decision making from past environments similar to this one.
We will perform our portfolio rebalance on Wednesday, after the Enterprise strategy confirms positioning.
As far as Sectors and Factors allocation goes, the VAA model is tilted toward Growth (IVW), Tech (XLK), Mega Caps (MGK), Industrials (XLI) and… Utilities (XLU)!
Signal Sigma PRO members will be notified by Trade Alert of any live portfolio changes (if subscribed). If you’re not on this plan yet, you can get a free trial when you join our Society Forum. If you need any help with your trading strategy (or would like to implement one on your account), feel free to reach out!
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