Well folks, the market continues to sway unpredictably given the announcements made at Jackson Hole on Friday which added further fuel to the fire as we received key employment data yesterday - this sent the market, alongside some of our picks, tumbling by 1%. Read on for your daily dose of market inspiration to help guide your trading in these choppy waters.
"It's OK to have your eggs in one basket as long as you control what happens to that basket."
- Elon Musk
The S&P 500 briefly broke below the lower bound of its price channel yesterday before rejecting that level and closing basically on par with the 200-day moving average. If it loses this level on Friday’s employment update the index could slip to just below 3900 points, the next support level. Moreover, the S&P 500 is closer than it has been for a while to initiating a new long-term growth trend as the 50 and 200-day moving averages have edged closer and closer over the last 6 weeks.
However, the only catalysts on the horizon that could really fuel a trend such as this are 1. A rate hike within expectations on September, 2. An above expectations Q3 earnings season and 3. An unexpected development within the Russia-Ukraine that sees energy and commodity exports normalize in the EU. That said, with Friday’s jobs report fast approaching and economists expecting 300K non-farm payrolls added last month, there are only two trading sessions until a large portion of what the Fed is eyeing to determine interest rates is answered with another being the inflation two weeks from now. Indices are marginally up in the pre-market with the Dow, S&P and Nasdaq respectively +16, 33 & 70 bps - trade responsibly everyone!
Long: Lululemon Athletica Inc (LULU-NASDAQ) | Timeline: 3 days
Everyone’s favourite cult brand is set to report earnings tomorrow after the market close. Unlike many other retailers in the consumer goods space, Lulu has the potential to experience growth for a few reasons. First and foremost Lulu’s target market of upper-class consumers are more capable of withstanding inflation and therefore price increases from the brand. Secondly, Lulu has begun to aggressively expand their international market size, opening a dedicated Spanish website in July, and has maintained its goals of quadrupling international revenue by 2026. And finally, due to their brand staying power the company isn’t as susceptible to the bullwhip effect and should have been able to maintain a steady schedule of merchandise orders. On the technical side of things, the company is currently trading between a band of its 50, and 200-day moving averages, with support levels at $300, and $290. The company will likely face resistance at the $320 and $340 mark as it attempts to break the trend through the 200-day MA.
Short: Donaldson Company, Inc. (DCI–NYSE) | Timeline: 2 days
Conn's, Inc. (CONN-NASDAQ), which operates as a specialty retailer of durable consumer goods and related services in the United States has reported earnings this morning, and they’re quite unfavourable, to say the least as the company missed earnings and revenue estimates by 57.14% and 6.37%, respectively. “While we entered the second quarter with a cautious outlook for the remainder of the fiscal year, the retail environment has continued to deteriorate prompting us to accelerate our efforts to reduce operating costs, and lower capital expenditures as well as continue to maintain conservative credit underwriting,” says CEO Chandra Holt as she struggles to maintain a positive company outlook heading into the latter half of the year. Turning to the chart, it is apparent the CEO’s statement holds true as the company has struggled to breakout above the 100-day MA, and after this quarter’s earnings report, bulls will most likely continue struggling due to bears capitalizing on a quality short opportunity as the stock breaks below its rising wedge.
Chart of the Day: A Closer Look at Eurozone CPI
Complement Chart: Eurozone Power and Gas Prices