Seasonal Weakness and Institutional Rebalancing Add Pressure to Markets

August is a tough month to trade.

There has been seasonal weakness over the past 35 years.

Liquidity is diminished and the volume is thin.

Volatility can rise.

Tax loss selling and rebalancing often occurs among institutions ahead of the end of the 3rd quarter.

Earnings momentum and fading optimism can taper off in August.

Maggie Lake and I covered a lot as always, and the video is available below.

Here are some of the notes I sent her ahead of time.

Yields topped as predicted and now, we could see further drop-looking at basing but fun starts over 90. The failed 100 if breaks 98 new leg down over 100 could see 103

Below is a chart of TLT. It represents everything I covered with Maggie and in other Dailys.

TLT, after an auction today, sold off. However, the chart is clear. The rally Tuesday was to the July 6-month calendar range high (I talk a lot about that).

The continues to outperform for now which shows risk on.

The Real Motion Indicator had a mean reversion sell signal right at the calendar range high.

HOWEVER, the dots are above the moving averages while the price is above the 50-DMA and below the 200-DMA. A bullish divergence.

What I discussed with Maggie is the possibility that yields drop further, TLT clears the resistance and SPY, can continue to run as well, but watch for the performance to shift.

This is the monthly chart of the dollar.

The rally back up to the 80-month moving average (100) was a perfect technical bounce into longer-term resistance.

The dollar under 98 will look more like a failure and reason to believe it will head even lower.

This is bullish for commodities and Maggie and I cover a lot about energy and the various raw materials related to energy.

Has bottomed?

Very possibly.

Maggie and I also discussed and how it looks great over 3350 and over 3450 we could see new all-time highs.

, 38.50 is the point to clear and then 40 is the breakout.

This is the October contract of gold.

I have heard a lot of bears out there.

I do not see any bearish case in this chart.

The 3 charts I include in the Daily should help you determine risk and the next direction of the market.

A weakening dollar, lower yields and rising gold prices are generally risk-off.

Should gold sell off, yields remain flat, and the dollar runs up, the market may hold, so that is when you refer to the July 6-month calendar ranges.

What is breaking out, down or stuck in a range.

ETF Summary 

(Pivotal means short-term bullish above that level and bearish below) 

The divergence between growth and value continues to widen

S&P 500 (SPY) 628 pivotal

Russell 2000 (IWM) 215 July low to hold 222 close resistance

Dow (DIA) 440 must hold now

Nasdaq (QQQ) 562 key pivotal area

Regional banks (KRE) 59 the July low and very pivotal

Semiconductors (SMH) 280 support and 293 the place to clear

Transportation (IYT) 68 area must hold

Biotechnology (IBB) 133 failed-now the point to clear

Retail (XRT) 81.70 the July calendar range high to clear

Bitcoin (BTCUSD) 116 to clear 111 support

Educational purposes only, not official trading advice.