preview of the week 05Sep22 - will the fall continue?

Public Holidays

Labour Day - 05 Sep 22 at the USA

Economic calendar

The initial jobless claims will be another important consideration for the Fed as they muse over the rate of interest rate increase expected in the latter half of September 2022.  

The non-manufacturing PMI (Aug) will cast an important outlook on the non-manufacturing or service industries.  If the actual PMI is much lesser than expected, it could have a bearish impact on the market.

Fed Chair Powell will speak this week and should bring some insights into the coming steps of the Federal Reserve.

As for Crude oil inventories, it is a "forward-looking" indicator coming to consumption of the market.  Crude oil inventories must be consumed first before they will eventually enter the market as products.  Thus, if the producers are consuming lesser now, it is a sign that they are expecting the consumption to be reduced.

News & my Muse

Global food crisis.  Maybe we are just too far and comfortable to feel much. For us who can, let us not make room & time for charity.  Maximo T Cullen, FAO’s chief economist, says wheat & fertilizer supply shortages have driven up prices & increased food import bills for the most vulnerable countries by more than $25 billion, putting 1.7 billion people at risk of going hungry.

China EV Sales: Better than feared but new concerns emerging

The delivery numbers themselves don't have any major negative surprises, but other developments are hurting stocks, including the Nvidia chip ban & the Chengdu Covid lockdown.

European inflation hits another record in August 2022

ForexLive: Eurozone August preliminary CPI 9.1% vs 9.0% y/y expected.

Europe's inflation hits 9.1% with energy up 38% compared to a year ago. 

As a consequence of the rising cost of input fuels, benchmark electricity prices in Europe have surged almost 300% in 2022, breaking records. Taken together, energy prices are 10x higher than the five-year average.  Source: Time magazine

war has spread from the streets of Ukraine into wall street, energy and food. Food, fuel & finances - are 3 areas of crisis but the internal divides caused by conflicting values (race, language & religion), inequality can lead to downfalls of kings and kingdoms.

It is important for wage equality. This will also have an inflationary impact after this is passed.

More are shorting against the market - expecting a downturn. 

Market outlook

1D chart of S&P 500

from the chart above, we have the following observations:

• The stochastic indicator looks to be bottoming up over the coming days.
• The MACD indicator looks to be on a downtrend
• The exponential moving averages (EMA) lines have converged and look to be starting a downtrend.
• Then moving averages (MA) lines are sending various signals.  The MA200 line (long term) looks to be on a downtrend.  The recent candles have cut the MA50 lines from above and look to be pointing to a bearish trend too.
• With increasing volume in the last few days of the week, it does imply that there is increased strength in the ongoing trend.

From the above, it does point to a more bearish outlook in the coming days.  With Stochastic nearing bottom, we may see some "rallies" but the short-term trend remains to be more bearish - where the magnitude of drop should exceed the magnitude of the rallies.

We are expecting more challenging times ahead with crises in fuel, food and finance.  The current extreme drought is expected to affect also the cropping of the current & coming harvest.  With Russia's interrupted gas supplies into Europe, we will expect much more disruption and inflationary effects to hit the markets.

For now, let us continue to remain prudent.  Let us spend within our means, and invest with what we can afford to lose.  We should also set aside some "cash for crash" to buy into great companies at good discounts.