Daily Rundown: August 24

BOB LANG: Good morning, Action Alerts Plus members. It's Wednesday, August 24, 2022. And here's what we're watching today on The Rundown. So markets have fallen sharply the last few days through some support zones. Actually, Monday was a rather dismal day, following through from Friday's disaster. And we fell through 4,200 pretty sharply. And we have some targets down below, mainly around 4,100 if the S&P 500 can find some support there.

The futures market, of course, the S&P futures have found a little bit of support there at that 4,100 level last couple of days. We'll see if that holds here today. We're ticking in at around 4,130 right now, down a couple of points as we-- markets probably taking a rest as we wait to hear from Chairman Powell in the Jackson Hole conference.

So if we do break that 4,100 level in the S&P 500, we do have some targets below at about 4,070, then about 4,000 ultimately. 3,973 comes into play at the 50-day moving average. Of course, that's rising every single day by a few points. So by the time we get to it, it might actually be higher than that 3,973. But that's going to be an important level to see if buyers can pick up the pace.

Volatility has risen lately, thanks to the uncertainty about potentially Fed policy. And again, Chair Powell is going to be speaking at the Jackson Hole conference, which is put on once a year by the Kansas City Fed. We also hear from other central bankers from around the world. I think Japan's central banker and also a representative from the euro is going to be there as well. We'll be listening carefully to see if there's any clues as to where we could see monetary policy will be moving into the end of the year.

But one thing's for sure, rising interest rates and global inflation have been stinging all markets all around the world. So we did see some economic data coming out today and earlier this week. We saw the Purchasing Managers' Index earlier this week was dismal, shown at about 44, and also showed some contraction this morning. We saw durable goods coming in weaker than expected. And districts from around the country, including Philadelphia, Richmond, the Empire State, which is New York, and Dallas, have been showing poor manufacturing data as well too.

So this is something that the Fed has been worrying about whether the economy is going to go into a tailspin and possibly go into a recession. But they still have to be focused in on interest rates rising and be focused in on inflation. This is something that we've heard yesterday and by a few governors. Neel Kashkari came out from Minnesota and said the exact same thing, that we have to really be focused in on inflation, snuffing it out even if it requires higher interest rates for longer.

So let's just remember something, the bear market is still alive and well. There is no escaping it right now, until the Fed is done and accomplished their mission of snuffing out inflation. The bear playbook is certainly required right now, which calls for high levels of cash, playing defense with defensive plays, using protection-- we do that with the PSQ and the SH, we'll talk about the PSQ in just a minute-- and being patient, just waiting.

So yesterday, we did take some action, and we reduced some Nvidia. And we added more to that PSQ, which is the inverse of the NASDAQ 100. So one of the reasons why we reduced Nvidia-- they do have earnings coming out later on today. And it was a semi-large position, about 3%. The stock's come down a little bit. But we did take some profits on the name. The stock has been in the portfolio for quite some time, and there are some robust gains in there over the past couple of years.

But we do see some signs that semiconductor business is slowing down a little bit. We did hear that Nvidia just a few weeks ago did warn about the quarter and said there was some problems in the gaming segment of their business. We did hear that from a couple of other companies as well too. So this could be pointing towards more of a slowdown, and I think there's some risk to the downside on this stock.

So we just took some money off the table, added it to the PSQ, which, again, is the downside for the NASDAQ 100. It's the inverse. It's been down a little bit for us over the past couple of months. Of course, as the NASDAQ has been rising, this PSQ goes down. But it's defensive for us. It provides us a little bit of protection against the downside as well too. So we're not looking to make a killing on this thing. But actually, the point here of having the PSQ and the SH in the portfolio is to reduce volatility of the overall portfolio. And along with that, cash provides a nice little bit of defense. So that's it. Have a great day, everyone. And we'll see you tomorrow.