Data and Debates Will Test Retail Buyers and Markets This Week

Shah Gilani|September 28, 2020

This week’s going to be a battle between buy-the-dip retail traders and double-dip recession fearing investors. Each side has plenty of ammunition and both camps are looking for back-up in data out this week and possibly some direction from the debate on Tuesday.

Bulls are betting the dip in markets and correction in some mega-cap tech darlings are a buying opportunity. And they’re going to test the waters early this week. Bears are betting the dip’s not done and sloppy data on the heels of no-stimulus in sight will grease the path lower.

Last week’s fight gave both camps hope, but the round went to the bears.

My money’s with them because retail buy-the-dippers aren’t likely to get institutional follow-on momentum as money managers aren’t ready to commit the massive amount of sidelined cash they have at the ready until they see what the election brings.

Here’s what happened last week, what data points could move markets this week, and a final word on the near-term direction of equities.

What looked at the end of the week like a dull week, last week, was anything but.

The Dow ended the week down 1.7%, the S&P ended the week down .6%, and the Nasdaq Composite ended the week up 1.1%. And for those who appreciate the Russell 2000 as a something of a reflection of our domestic economy, it was down 4% on the week.

Monday saw the Dow down almost 2% and the Russell down 3.35%. The Dow had been down 3.4% and the Russell had been down 4.3%, before end of day buy-the-dippers came in. A “blues” Monday, for sure.

Tuesday, the Nasdaq rallied 1.7%, and was the best performing index that day. Not a bad bounce.

Wednesday saw another dump, with the Dow falling almost 2%, the S&P falling 2.37%, the Nasdaq falling 3.02%, and the Russell leading the drop losing 3.04%. So much for that dead cat bounce.

Thank goodness for Thursday when the average of the major indexes saw an inspired gain of .22%… Not.

Friday saved the week, with the Dow up 1.34%, the S&P up 1.6%, the Nasdaq up 2.26% and the Russell up 1.59%. If you want to call that a win, which it wasn’t.

To make matters worse, for the bulls, every day last week, and the week before when markets were down, they were down on bigger volume than any and every up-day’s volume.

And Friday, the up day that saved the markets, sadly, it saw the lowest volume of the week, by far.

That’s now four weeks in a row the Dow and S&P have been lower.

The tremors are indicative of something bigger, something the bulls are going to have a hard time overcoming: data and election fears.

Of course, the buy-the-dip retail crowd could come rushing in, which is what we saw on Friday, on thin volume, and take us back up to levels from which we could consolidate and leg higher.

They could. But they won’t, not if bad data this week or a debate debacle crushes retail sentiment.

Important data points this week include:

• TUESDAY: The Conference Board’s September Consumer Confidence Index , where economists forecast a 90 reading, higher than August’s 84.8 reading. And, of course, we have the television event of the year, the debate between the candidates.
• Wednesday: we’ve got the ADP National Employment Report for September, which sees 625,000 private sector jobs being added, up from 428,000 in August. More importantly we’ve got the BEA (Bureau of Economic Analysis) final estimate for Q2 GDP, expected to be unchanged and MINUS 31.7%.
• Thursday’s a big day. We get initial and continuing unemployment claims. And from the BEA we get personal income, expected to drop to -2.8% (month over month), it rose .4% in August from July. And, maybe most importantly, Thursday we get August PCE (Personal Consumption Expenditures), or spending. That’s supposed to be up 0.9% after being up 1.9% in July, which would be a big come down. We’ve also got the annual, and this year virtual, Black Diamond Conference, and you can still get your tickets right here.
• Friday, we get non-farm payrolls and the nation’s unemployment rate. Payrolls are supposed to see gains of between 840,000 on the low end up to 1.032m on the high end. Last month saw 1.371 million jobs added. Unemployment is supposed to fall to 8.2% from 8.4%, which if it happens will be attributed to more people not even looking for work.

It’s going to be an important week for benchmark indexes facing down “levels.” After flirting with correction levels and trying to rally, traders are going to be watching all-important support levels. If stocks steady themselves and buyers make a bold move, all the benchmarks still have to get above near overhead resistance levels.

All those support and resistance levels are spelled out in my Money Map Report Monday edition, which you might want to consider signing up for, because that’s not all you get.

Let’s see how markets react when they get to some of those support and resistance levels this week, because they’re going to make or break the trend.

Until then,

Shah