Pre-Market Outlook 8/23/2021

I will put out the View from the Top Down later this week. Suffice it to say that the 40-day cycle dip was completed intraday on Thursday. The NASDAQ 100 and S&P 500 indexes have since risen swiftly and both are within striking distances of new highs this morning. Other than that, nothing is new.

Many warning signs of an intermediate top continue to manifest. But the market is not quite ready to topple. When it does, the initial downdraft will be swift and it may be well underway before the New York Stock Exchange opens. That is among my biggest concerns at the moment.

We will hear from the Fed after the Jackson Hole conference later this week. That could rock the markets, yet I still don’t anticipate that the Fed will taper with the current circumstances in Afghanistan and spreading Delta variant.

Fear continues to be very high as measured by many sentiment indices. Typically, the market does not correct when fear is this high. Of course, there may be exceptions but the market is climbing the wall of worry at the moment.

Another issue weighing on me is that the FAANGMAN+T stocks may be acting like defensive stocks. Let’s face it, their earnings have been rock solid and only seem to benefit from the exigent circumstances of the last 18-months. 

So maybe Microsoft, Google and the like have morphed into the same category as Utilities. They are safe havens. That could explain the narrow breadth still carrying the market – especially given the index weighting of the tech monsters/

We have a gap higher this morning on top of Friday’s bullish activity. Gap rules apply.

The market has crossed back above the mean on the daily chart, a bullish sign

If stronger sellers are going to emerge to turn these charts south, then they need to do it soon. The odds of a reversal back to recent swing lows are diminishing with every uptick.

As always, how much of the gap fills (if at all) is extremely valuable information to carry forward. It will tell you what type of day is likely to unfold.

Note that the ONL (4434.25) is right at settlement with only a few ticks of variance. Assume that low is weak and could be a short point if tested.

The market should favor longs above the ONH (4455) with an ultimate target of the ATH (4476.50), although there is some distance to travel and traders should monitor closely for confirmation.

A.F. Thornton