Conditions Are Improving for Short-Term Speculation

The S&P 500 has been down, up, down, up, down over the past five trading sessions as it consolidates near all-time highs and digests earnings, tariffs and economic news. The weak jobs report last Friday was shrugged off, and tariffs are having little impact, but technical conditions are mixed, and that is leading to choppy action.

The Magnificent Seven MAGS is leading once again, with Apple AAPL taking the reigns. Apple is testing overhead resistance at its 200-day simple moving average and has been able to shift its focus to its U.S. investment and away from concerns that it is lagging in the AI competition.

There continues to be quite a bit of speculative action in secondary stocks. The list of names moving up more than 10% is quite long. This is due in part to small-cap earnings reports, which are hitting this week and next, and also due in part to retail traders looking for action. It may be the dog days of summer, but there is still interest in aggressive short-term trading.

The last two weeks of August are typically one of the slowest periods of the year, but that can produce increased volatility and can be good for short-term speculation.

The bears continue to predict that poor economic news will hit at any time, but that is offset by confidence that the Fed will be cutting rates at its next meeting in September. President Trump is appointing a new Fed member, and that will likely increase the likelihood of a rate cut.

The biggest issue going forward is likely to be seasonality. Seasonality is a tendency and not a certainty, but it can impact the reaction to news. If investors are worried about seasonality, then they are more likely to sell into positive news.

Conditions may be choppy, but that is a healthy way to deal with overbought and extended technical conditions.

At the time of publication, DePorre had no positions in any securities mentioned.