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The Price Action Lab Report-Week of August 1, 2022 [Premium Articles]

Market analysis for the week of August 1, 2022. The analysis focuses on major market indexes, ETFs, commodities, and forex. Access to the full article requires a Premium Articles subscription or an All in One subscription.

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Report contents

  1. Weekly summary.
  2. Market performance recap.
  3. Major market indexes.
  4. Equity index and fixed income ETFs.
  5. Commodity ETFs and ETNs.
  6. Spot currency pairs.
  7. Charts to watch.

1. Weekly summary

  • Stocks surged with the summer rally gaining momentum.
  • Bonds yields fell and bond prices gained.
  • Commodities rebounded strongly on the week.
  • Crude oil spot prices were higher amid supply concerns.
  • The US dollar fell and precious metals were higher on the week.

Recap (July 25, 2022 – July 29, 2022)

Large-cap stocks ($SPX) surged 4.3% after an initial fall of 1.3%. Tech stocks ($NDX) rallied 4.4% after dropping 2.8%. The Dow 30 ($DJI) added 3%. Small caps ($RUT) gained 4.3%. The S&P 500 high beta large-cap index ($SP5HBI) gained 5.6% after rising 6.1% the previous week. The S&P 500 low volatility large-cap index ($SP5LVI) gained 4%. In the last six weeks, the S&P 500 has recovered from a bear market territory and is now down 13.9% from all-time highs.

The gains in total return equity indices from June 17, 2022, are shown in the table below.

The S&P 500 High Beta and Growth total return indexes have gained 19.04% and 17.13%, respectively. The S&P 500 and Small Caps total return indexes have gained 12.81% and 13.05%, respectively. The NASDAQ-100 total return index is 21.5% below all-time highs. 

Two weeks ago I wrote:

The odds of a “summer rally” are higher. Investors have started focusing on “good news,” or interpreting news as having a positive impact on equities.

The summer rally is in full force, and there are conditions in place for further gains. There is a small probability of a full recovery in equities, but another bull trap cannot be ruled out. The future course of inflation and rate hikes will be the main drivers that will determine the direction of the market, and these are unpredictable. Extreme bullish or bearish views make headlines in the financial mainstream media, but in reality, no one knows the future and these reflect wishful thinking.

Exposure control and diversification are two proven strategies that can mitigate risks and prevent large losses. Gamblers will gamble, and sensational analysis will always find its way to mainstream media and blogs, but prudent risk management dictates not paying attention to extremes but focusing instead on ways of minimizing the risks.

US Treasury Bonds ($SPBDUSBT) gained 0.3%. The 10-Year Note yield fell 14 basis points to 2.64%. Crude oil prices gained 3.5% amid speculation about supply and price normalization. The CRB index ($CRB) was up 3.9%. Spot gold (@GC) gained 0.9%. The US dollar index fell 0.8%.

Year-to-date, the NASDAQ-100 is down 20.7% and 21.9% below its all-time highs. The Russell 2000 is down 16% year-to-date and 22.8% below its all-time highs. On the positive side, the CRB index is up 25.7% year-to-date and the crude oil spot is up 34.2%.

The ensemble of our six systematic strategies is down 2.8% year-to-date, as compared to a 13.3% loss for the S&P 500 index and a loss of 10.7% for the 60/40 portfolio with SPY and AGG ETFs. The allocation of the six strategies will be 22.2% next week, while 77.8% will be in cash.

2. Market Performance Recap

If you have any questions, you may contact support.

Specific disclaimer: This report includes charts that may reference price target levels determined by technical and/or quantitative analysis. No updates to charts will be provided if market condition changes occur that affect the levels on the charts and/or any analysis based on them. All charts in this report are for informational purposes only. See the disclaimer for more information.

Disclaimer:  No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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