A market that can't pick a direction
It is the last full week of August, the summer slowdown, and the market is drifting sideways. The key technical level to watch is 7620 on the S&P 500 (SPX). That number matters because of the gap left on August 4th, when the index finally broke out of an 11-week trading range. Price looks set to retest that gap. If 7620 does not hold, I do not expect a crash, just a small pullback.
There has been no 5% drawdown since the bull run began in April (there was one earlier in the year). A setback or pause looks likely over the next 6 to 8 weeks. The reasons: seasonal headwinds, unexpected Treasury spending, and inflation worries with oil still above 85, which points to higher-for-longer rates. Nvidia (NVDA), reporting Wednesday afternoon, is the one name that could keep the market from slipping.
Rotation, not just an unwind
Chips are struggling this morning. This looks less like a momentum unwind ahead of Nvidia and more like a rotation into sectors that lack the weight to lift the whole market higher. Energy is only 3% of the S&P 500. Materials look strong, and healthcare is catching bids. Overall market breadth stays positive, but the heavyweights are resting.
Memory names have been volatile. SanDisk (SNDK) fell hard. Even so, the longer-term trends stay intact; this is a reset, not a breakdown.
Software winners and losers
The bigger story is software, and it is splitting into winners and losers.
Salesforce (CRM), reporting later this week, shows strong price action and is breaking out on both the daily and weekly time frames. I am optimistic it can turn the corner and join Microsoft (MSFT), Palantir (PLTR), and Snowflake (SNOW), which have all bounced back from the software selloff. The hope is it avoids the fate of Adobe (ADBE) and Oracle (ORCL).
CrowdStrike (CRWD), the cybersecurity leader in software, sits 15% below its high in an upward-channeling formation. The risk-reward favors the upside, with downside risk at the 165-175 zone. The question is whether it holds and can lead again.
Marvell (MRVL) is up 160% year to date and sits at an inflection point. Its action last week was weak; it came in at the 50-day moving average near 237 and broke below it. A retest down toward 200 is possible. Marvell announced a partnership with Google, the parent Alphabet (GOOGL); watch its earnings for detail on that deal and how it helps the bottom line.
Those four - Nvidia, Salesforce, CrowdStrike, and Marvell - are the main names to watch. Other reports this week: Intuit (INTU), which drew an analyst call today and reports tomorrow; Okta (OKTA), which is very volatile, so be careful; Zoom (ZM), which has made a nice comeback and looks strong; and Workday (WDAY), which has been running well with plenty of headlines.
The macro setup: PCE and Jackson Hole
Wednesday brings the PCE report, the Fed's preferred inflation gauge. After in-line, benign PPI and CPI prints, the setup looks calm. As long as PCE comes in on target, the market is okay. It is unlikely to be a market mover. The new Fed chair may want a trimmed-down version of the PCE data, and Wednesday's release could reveal more about what he is looking for.
Question: will Fed Chair Warsh say something big at Jackson Hole on Friday? Answer: probably not. Jackson Hole has been a launching pad before - Bernanke in 2010, and Powell twice, in 2022 and 2024, when he talked about rates. But based on what has been seen so far, Warsh is unlikely to say anything on rates. Inflation is his number one target.
He threw a curveball last week when Treasury Secretary Bessent went after the balance sheet, something Warsh has been discussing. Whether he answers questions about the Treasury's moves is open; from what is understood, there was no prior communication between them. The Treasury is now tapping its general account, which was not expected, and Bessent has been working to cap bond yields - it is working today, though Friday was skittish.
The last Fed meeting minutes showed many officials favored a hike; "many" is more than the three dissenters. Warsh is likely to keep the market guessing into the September meeting and defer questions to the task forces, as he has been doing. A CPI and PPI print before that September meeting will be crucial.
