Good morning, traders…

Jeff here.

Last week we saw the worst performance for the stock market in over 18 months. 

I’ve been talking about this for a while: stocks are overextended, and volatility is here to stay. 

It’s getting rough out there. 

The rest of 2024, especially with the upcoming election, is shaping up to be a wild ride. 

I’ve been sounding the alarm that volatility will continue, and last week was a strong reminder of that. 

Furthermore, this volatility is coming after the Fed hinted at impending rate cuts, which is another danger I’ve warned you about for over a year now. 

The rate cuts are already priced in. Now that the Fed has confirmed they’re happening, they’re actually leading to a counterintuitive selloff.

And we’re not out of the woods yet. Expect the rest of the year to be bumpy, with market uncertainty likely to increase. 

But for now, let’s focus on what’s directly in front of us with my Tuesday Market Outlook for this week…

Watch the Market Leaders: Semiconductors

As usual, you need to keep an eye on the semiconductor stocks. These often act as the leaders for market trends.

Last week, Nvidia Corporation (NASDAQ: NVDA) — the biggest name in the sector — took a major hit. 

After decent earnings, it still couldn’t find buyers. Instead, it just kept dropping until it was outright decimated:

This sharp drop in Nvidia is a clear sign that even “sector leaders” aren’t safe from the market’s current volatility.

This week, we’re seeing a bit of a relief rally, which tends to happen over weekends when the market realizes the world hasn’t ended. 

The pattern is familiar. After a week of selling off, nothing bad happens over the weekend, so we get a bit of a bounce. 

But the question is: How long will this last? 

It’ll be interesting to see whether this pop can sustain itself or if it fizzles out. I’m leaning towards the latter.

September Could Be the Worst Month of the Year

Many people believe we’re going to see a repeat of August, where the market sold off in the first part of the month, only to rally later and fill the gaps. 

However, I don’t see that happening this time around. In fact, I think September could be the worst month of the year. 

I recently warned you about The September Effect, and here it is. The month has already started out on a rough note, and I expect things to continue downhill. 

If not September, then October will likely take the crown for the worst-performing month of 2024. 

We’re in for a rough couple of months, and I don’t think the market will find its footing for a while.

Key Economic Data Ahead

This week, we’ve got some big economic numbers coming out, which will be closely watched. 

The Consumer Price Index (CPI) and the Producer Price Index (PPI) are two of the most important indicators of inflation. 

While inflation was a huge focus earlier in the year, it seems like the market has shifted its attention more toward jobs and the overall strength of the economy. 

But that could change if the CPI/PPI numbers are a surprise in either direction. 

In addition to the inflation numbers, we’ll also be seeing the weekly jobless claims and retail sales reports — both of which will give us insight into how strong (or weak) the economy really is.

For the overall market trend to reverse to the upside, both the inflation and jobs numbers need to be positive indicators. 

The Fed Meeting Looms Large

Looking ahead to next week, all eyes will be on the Federal Reserve’s meeting. 

We’re at a point where the market is entirely beholden to what the Fed does and what the economic numbers show. 

With earnings season over, these reports and the Fed’s decisions are going to be the primary drivers of market direction for the rest of September.

Chairman Jerome Powell has already more or less guaranteed that the meeting will bring a rate cut. 

But will it be 50 or 75 basis points? The answer will tell us a lot about how the Fed thinks the economy is doing.

Expect More Volatility

As we move through September and into October, I expect more volatility and uncertainty in the markets. 

The market has shown us that it can turn on a dime, and this is not a time for complacency. 

This is the time to shrink the game: shorter holding times, smaller position sizes, and more conservative stop-loss levels. 

While we’re seeing a little relief rally right now, it’s unlikely to last long. 

I’m not a psychic and I don’t have a crystal ball. But over decades of trading, I’ve become pretty good at understanding where the market is headed.

And with major economic data on the horizon and the Fed set to make some big moves, the rest of September could be rough. 

This year’s not over yet, and it’s bound to keep surprising us.

Stay vigilant, keep an eye on the semiconductors, and be prepared for more market swings.

Happy trading,

Jeff Zananiri

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Happy trading,

Jeff Zananiri

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