Stocks are mostly moving up. Movement is modest. Trading is what you'd expect for a mid-August day. Wall Street will perk up at 2pm today when the minutes from the last Fed meeting come out.

Stocks could be in another holding period after eight straight days of gains for the major indices. In addition, the FOMC minutes from the July 30/31 meeting drop today at 2:00 pm, Jackson Hole and Chairman Powell take center stage on Friday, and a critical EPS report from NVDA comes next Wednesday. The major indices saw modest losses on Tuesday (between 0.2% and 0.3%). Once again, the small-caps took the brunt of the selling, with the Russell 2000 and S&P 600 both falling slightly more than 1%, and the S&P MidCap 400 dropping 0.9%. It was the weakest NYSE breadth day since the panic on August 5. Sector leadership (if you can call it that) was provided by defensive Staples (+0.5%) and Healthcare (+0.4%). Seven sectors saw losses of less than 0.4%. Energy was the big loser, giving up 2.6% as WTI fell back to the $73 region and close to the lows seen in early August. The Nasdaq 100 (QQQ) McClellan Oscillator (market breadth indicator) has traced out a breadth thrust as the oscillator jumped to +90 from -76 in 10 trading days. The indicator also went from below its lower Bollinger Band to above its upper band. We saw a similar combination of moves back in October/November 2023, just when the QQQ started a big move higher. We also have seen similar moves by the oscillator for the S&P 500, with a nice rebound from the S&P 100 as the oscillator rose to +86 from -69. Seasonality is tricky this time of year due to low liquidity. However, there is a weak period just ahead, namely the second half of September. And that is true whether we look at the past 30 years or the past 50 years. (Mark Arbeter, CMT)

Housing is in a summer slump, but help is on the way. A 50-basis-point decline in the 30-year mortgage rate since June and a likely rate cut from the Fed may not solve all of the market's affordability issues -- but they sure will help. Housing starts fell to an annual rate of 1.24 million in July, which is the lowest pace in more than four years according to data from the Department of Housing and Urban Development and the Census Bureau. Starts peaked at 1.8 million in April 2022, just a month after the Fed's first of 11 interest rate hikes in March 2022. Tighter monetary policy ended a long recovery from the Great Recession of 2007-2009. Signs that the Fed is poised to ease policy and reduce the funds target could bring buyers back into the market. "Better inflation data points to the Federal Reserve moving to cut interest rates possibly as early as September, and with interest rates expected to moderate in the months ahead, this will help both buyers and builders who are dealing with tight lending conditions," said Robert Dietz, chief economist of the National Association of Homebuilders. From a housing perspective, relief can't come soon enough. Based on the August 16 GDPNow estimate from the Atlanta Fed, residential fixed investment is expected to decline by an annualized 11.7% in 3Q after a 1.4% drop in 2Q. Tomorrow, we expect the National Association of Realtors to report July Existing Home Sales of 4.0 million (SAAR), little changed from 4.05 million in July 2023. On Friday, we expect the Commerce Department to report July New Home Sales of 630,000 (SAAR), down from 700,000 a year earlier. The S&P/Case-Shiller National Home Price Index jumped 5.9% in May. We expect growth to soften to 5% for June. The Zillow Home Value Index rose by 3.8% in June and 3.3% in July. We remain bullish on the sector because demographics point to strong demand amid a decades-long shortage of affordable homes.

As of this writing, major indices are getting closer and closer to their all-time highs (ATHs) from July 10 and July 16 (S&P 500 and S&P 400, respectively). The only major index that has bounced enough to reclaim ATH territory is the NYSE Composite, probably due to the minor 5.6% pullback the index saw in the second half of July and early August. The S&P 500 (SPX) is within 1% of its July 16 all-time closing high of 5,667.20 and remains on its 'V' shaped formation and trajectory. The Chande Trend Meter is back up to 83%, indicating a strong and strengthening trend; the Vortex Indicator is close to bullish territory; the 14-day Relative Strength index is back above the midline 50% level; the daily MACD is back in positive territory; and the 21-day rate-of-change has cycled back into bullish territory after dropping into negative territory at the start of August. Some 75% of SPX stocks are above their key 200-day average, while 73% (up from 44% on August 5) are above their 50-day. More impressive, the more-concentrated S&P 100 (OEX) is showing 83% of its stocks above their 200-day average, up from a recent 65%. Both the SPX and OEX advance-decline (AD) lines have surged to ATHs prior to price; historically, that has been very bullish for at least the intermediate-term period. The Nasdaq 100 (QQQ) is 4.5% from its ATH near 503 and its AD line has posted an ATH prior to price. Some 71% of QQQ issues are above their 200-day, up from 44% just 10 days ago, while the percentage above the 50-day has jumped to 61% from 29% on August 7.

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