What Will August Bring?

As we start off this first day of August and first trading day of the week the cat is out of the bag, and the market doesn’t like what it sees. The S&P 500 is now trading below its 200 day moving average as of this writing, which indicates further weakness ahead.

The equity markets started out strong, as did crude oil and the dollar. All that has changed now when the manufacturing sector came out and said that things were slowing down quite dramatically. In fact new orders grew at their slowest pace in 2 years in July, with new orders contracting, it represents a troubling development for the economy and the stock market.

Viewers of this report will note that we have been very cautious on the stock market as we felt it was rolling over to the downside based on technical analysis. A close today below the 200 day moving average which comes in at 1285 will be viewed as a negative for the S&P 500.

At this point, the greatest fear is a potential downgrade by one of the rating agencies. Should that happen, more pressure will be put on this market. Many investors have become complacent and this is a real danger in my view. I think there’s a major opportunity to make money in this market as I see the S&P 500 slipping to the 1265 level before any kind of bounce.