Bulls Charge Toward Jackson Hole

By Michael Lebowitz | August 23, 2021

European Manufacturing Indexes were generally weaker than expected but it didn’t take the wind out of the sails of the U.S. Equity markets. They look to continue Friday’s gains, up a quarter to half a percent this morning. After dipping below $62 on Friday, oil is back up to $64 in early trading.

On Friday we published the table below for subscribers of RIA Pro. It accompanied other graphs and commentary on the technical situation of the 12 S&P 500 sectors as well as major indexes and factors. The graph below, from the report, shows Utilities (XLU) have the highest RIA Pro technical score and the most momentum.

, Bulls Charge Toward Jackson Hole

Dallas Fed President Robert Kaplan, a strong proponent of tapering in the coming months, put the markets on alert that taper may not be as inevitable as many investors believe. Per Reuters: “any economic impact from the Delta variant of the coronavirus and he might need to adjust his views on policy “somewhat” should it slow economic growth materially.”

The problem with his statement is in trying to discern why economic activity is slowing. Delta is certainly playing a role, but fading stimulus, reduced consumer confidence, inflation, China, and a sharp reduction in pent-up demand are also weighing on the economy. Delta may be a convenient excuse for the Fed to delay tapering until next year. The initial market reaction to his comments was positive.

What To Watch Today


  • 8:30 a.m. ET: Chicago Fed National Activity Index, July (0.11 expected, 0.09 in June)
  • 9:45 a.m. ET: Markit U.S. Manufacturing PMI, August preliminary (62.3 expected, 63.4 in July)
  • 9:45 a.m. ET: Markit U.S. Services PMI, August preliminary (59.2 expected, 59.9 in July)
  • 9:45 a.m. ET: Markit U.S. Composite PMI, August preliminary (59.9 in July)
  • 10:00 a.m. ET: Existing home sales, month-on-month, July (-0.5% expected, 1.4% in June)


  • No notable reports scheduled for release

Top 10 Strongest RSI Stocks From RIAPRO.NET

Click to enlarge

, Bulls Charge Toward Jackson Hole

Extremely Long Period Without A Correction

As we have noted China’s economic activity is weakening. The message is not lost on its equity markets. Hong Kong’s Hang Seng Index is now officially in bear territory, down 20% from its February peak. The S&P 500 is up 10%+ over the same period.

, Bulls Charge Toward Jackson Hole

Zero Hedge put out an interesting piece titled Morgan Stanley Spots a Flashing Red Market Risk warning about option gamma flip points. Morgan Stanley says gamma “flips to short below 4250. That is where we could hit an air pocket.” On Monday, in our Gamma Band Update, Erik Lytikainen pegged the S&P 500 gamma flip level at 4205. The gamma flip point is where dealers, on average, have to sell stocks versus buying them to hedge their options books. Given the increased volume in options, and call options, in particular, these flip points provide a level where the recent bout of selling could accelerate. In addition to key moving averages which have served investors well recently, gamma flip points another level of technical guidance worth following closely.

After a relentless grind higher, some key manufacturing metals such as copper and iron ore have begun to fall in price. Copper for instance is trading at $4.00, down from a high of $4.80 in early May. Iron ore is down 30+% over the same period. Not surprisingly the Australian dollar is also trading weaker as it is a large exporter of metals and minerals. China, whose economy has been slowing markedly, accounts for 42% of Australia’s exports. The second leading country they export to is Japan, constituting only 13%.

Despite the declines in some key industrial metals, the well-followed CRB commodity index, shown below, has yet to break its uptrend. The index is weighted 41% to agricultural products, 39% to energy, 13% to industrial metals, and 7% to precious metals.

, Bulls Charge Toward Jackson Hole

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Michael Lebowitz, CFA is an Investment Analyst and Portfolio Manager for RIA Advisors. specializing in macroeconomic research, valuations, asset allocation, and risk management. RIA Contributing Editor and Research Director. CFA is an Investment Analyst and Portfolio Manager; Co-founder of 720 Global Research. 

Follow Michael on Twitter or go to 720global.com for more research and analysis.
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