Weekly Newsletter August 10th to August 14th
RECAPPING LAST WEEK
Equity markets continued their march higher last week, as the S&P500 and Russell 2000 hit new all-time highs for the second consecutive week. The NASDAQ came within 2% of its early June all-time high, though it continues lagging its counterparts. Nine of eleven S&P500 sectors gained ground, with materials and consumer discretionary falling behind. Crude oil rose 6.5% on yet another stall in negotiations with Iran, sending Energy up 7.5%, making it the clear leader. 86% of S&P500 stocks have reported earnings that exceeded expectations, with 88% reporting. Currently Q2 earnings are tracking a staggering 50% higher than the same time last year, which has helped to ease markets’ concern with unprecedented AI capex spending. We saw a new development in the capex story last week, as Nvidia’s CEO Jensen Huang took a ‘wall street tour” and reached preliminary agreements with Goldman Sachs and four other firms to raise $500 billion to build additional AI infrastructure, on top of the more than $700 billion the hyper-scalers were already expected to spend this year. The deal potentially extends the massive spending path well into next year and helps explain the market’s overall strength this week. Inflation numbers supported the rally, as July’s CPI data came in right on the screws, rising just 0.1% month-over-month and 3.4% year-over-year, with producer prices unchanged. Those numbers reduced expectations for a rate hike at the September Fed meeting to 35%, down from 55% a week earlier, and 80% in late July. Jobless claims remained low at 209K, easing concerns from the payroll report the week before. Despite all the good news, Treasury yields remained elevated, with the 10-year closing at 4.68%. Most other metrics stayed constructive as the dollar held firm, credit spreads stayed tight, and volatility continued pressing lower. International equities rallied as well, with emerging markets taking the lead, confirming the markets risk-on posture. Precious metals rose modestly last week, but bitcoin can’t seem to catch a break, losing another 3%.
THE WEEK AHEAD
This week is packed with economic data, but the focus will be on the release of July’s FOMC minutes as investors look for clues regarding the Fed’s posture leading up to the September meeting. The decision to hold rates steady in July featured three dissenters so these minutes could reveal how close the other nine were to voting for a hike. U.S. housing and manufacturing data will appear throughout the week, and inflation data from Canada, The Eurozone, and Japan will tell whether global inflation is cooling alongside the U.S., though the recent rise in energy prices won’t be reflected in those reports. Japan’s GDP release could have implications for further tightening from the BOJ, and at midweek we’ll see the U.K. and Australia’s employment data. Earnings reports will be retail-heavy: Home Depot weighs in Tuesday, Target, Lowe’s, and TJX deliver results on Wednesday, and Walmart and Ross Stores report Thursday. The main concerns will be oil prices and treasury yields—any retreat from recent highs in these areas could turn the markets’ current headwind into a tailwind, adding further support. On the other hand, continued pressure would make it difficult for equities to continue their advance.
CHART OF THE WEEK
Elliott Waves Continue
We’ve been watching the S&P500 through an Elliott Wave lens for years. The wave counts are more accurate for some scenarios than others, but over the past 18 months, its predictive power has been impressive. You can watch a replay of the full hour we spent earlier this year going through the details here, but briefly, it’s so far tracking just as expected. The “Liberation Day” drop in April of 2025 offered a clear wave 4, setting up the wave 5 rally, which also subdivides into 5 waves. The low in March of this year counts best as the 4th wave of that larger 5, setting up one more wave 5 of a smaller degree, which of course sub-divides the same way. This is where it gets interesting: wave 1, after the March low, was $1300 strong and lasted two months. Wave 2 was a triangle corrective wave that also lasted two months. Wave 3 is typically the longest and strongest of the 5, and since it has only been going for 2 weeks there is potential strength still to come. Fibonacci extensions come in handy when prices are exploring new highs. Here, they line up with 2 round numbers overhead. The 61.8% extension of wave 1 lands right at 8,000, and the 100% sits at 8,500. There are never any guarantees about the future, but the market conditions mentioned above along with the Elliott Wave structure outlined here are signaling continued upside.
Source: Charles Schwab Corporation
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