Daily Rundown: August 15

BOB LANG: Good morning, Action Alerts PLUS members. It's Monday, August 15, 2022. And it's time for our rundown. We have a lot to cover today. So let's get to it.

Markets were real strong last week and finished right at big resistance. That downtrend line that we talked about last week comes in at around 4,300 to 4,270, the downside on the S&P 500. And we're seeing a little bit of rejection at that level this morning.

Actually, we did see quite a bit of negative activity early this morning, probably due to the poor China numbers that came out overnight on fixed-asset retail sales and investments in industrial production. So that really caused a lot of weakness overnight. And then this morning, we saw a very poor reading on the New York Manufacturing Empire Index, second worst reading ever, minus 31. So that's causing a little bit of weakness.

We have rallied back a little bit. Now, NASDAQ has gone green here. So we'll see if the dip buyers continue to take advantage of the dips here and push the markets a little bit higher. Again, once that collision hits, about 4,280 to 4,300 on the S&P 500, it will be some fireworks there. So we'll have to see how things go.

We also should note that oil is down 5% today with some news that some suppliers are willing to put a little bit more oil out on the market. And that, again, has put pressure on the price of oil, along with gasoline prices, which demand has really been sapped a little bit since 4th of July. And it certainly is going to pick up around Labor Day coming up in a couple of weeks. But certainly the demand has been down a little bit and causing gasoline prices to come down. Good for the consumer.

The VIX today is rising as we encounter a risk-off day. We'll see if the dip buyers return as they did last Wednesday. But VIX, interestingly enough, the expiration is going to be coming up later on this week. We'll talk about that in just a moment. Support on the S&P 500 comes in at around 4,250. And if we pull off that level-- and I think we did hit that level earlier this morning and bounced off of that nicely-- and into the close today, some intermediate indicators will start to turn bullish. And actually, a few of them already have.

We have about 13 trading days left in the month of August. Already 10 trading days have gone by and the S&P 500 is up an astounding 3.6%. That's after coming off of a strong month of July. It's pretty darn impressive for the month of August so far.

And again, as we mentioned last week, after 10 trading days in August, only three trading days are up. Seven trading days are down. And those three trading days that are up were responsible for that huge gain so far in August. So it's pretty amazing.

So basically, what does it tell us? It tells us that the selling conviction is not there and the buying conviction is. And for the time being, we're going to follow that trend and follow the volume and follow the price action and see where it leads.

We'll be watching retail sales later on this week. And, of course, two big events happen. We have earnings and we have retail sales earnings coming out on Wednesday morning.

Let's talk about earnings for a moment. We have four big-box retailers coming out this week. And three of them are, or two of them are Dow names. Walmart and Home Depot come out tomorrow morning. And then on Wednesday morning, we'll hear from Target, and Lowe's. So we may get some pin action on those two names from the earlier announcements from Walmart and Home Depot.

And again, those two stocks are Dow stocks. So we may get some pin action on that index as well, too. Retail sales, again, Wednesday coming out, Wednesday morning. It was a pretty strong number in June. We'll see if we can get some back-to-back good readings in July.

Again, the jobs number pointed towards potentially some good action there. We have back-to-school shopping going on. We also did have in July the Amazon Prime Day, which they hit record numbers, too. So all that combined could set up a really nice strong number for retail sales in July.

And then we'll talk about inflation, a little bit about inflation, has maybe softened a little bit. And we'll hear from some Fed governors. We have four speakers coming out this week. And this is the first time they're coming out since last week's inflation reading on CPI and PPI. So perhaps they are going to be a little bit less aggressive and less inclined to push rate hikes later on this year.

I don't think that's the case. The year-over-year numbers were strong. 8.4% on CPI is a little bit too, a little bit too hot. And again, their goal is to get inflation down to a moderate amount, which is about 2%. But perhaps this number is going to change some people's minds about inflation.

And finally, we're going to be paying attention to some of the action in volatility and options this week. And why is that? Well, volatility, the VIX options expire for August tomorrow after the close. Actually, they on the opening print on Wednesday.

It's the final day of trading is tomorrow. And they're coming together today. And so the VIX cash, when it gets separated from the VIX future, needs to come in and match up, because once the future goes away, it becomes the present. So we're seeing a lot of that conversion happening today, the VIX future not up as much, VIX cash up a little bit stronger today. That'll end tomorrow.

And then finally, options expiration is on Friday. That's the monthly expiration for August. And that's going to bring some fireworks as well, too. There's a lot of options that are in the money. So a lot of call options actually over the past month or so.

Of course, the market's been strong. So if you're on call options, you might want to go ahead and exercise some of those options and get some of that stock put to you before Friday, too. So that could be another firework to put some pressure up on the markets, and maybe pop through that 4,300 once and for all.

Thanks, everyone. Have a great day. That's a wrap for Monday. And we'll see you tomorrow.