The Monday Morning Playbook: Week of September 3, 2024

Good morning,

Last week, I discussed how the importance of Nvidia’s earnings report had likely declined in the wake of Powell’s well-received Jackson Hole speech.

That proved true, as Nvidia fell more than 6% on Thursday. The move was far from catastrophic and arguably technically insignificant. But the market’s reaction (2:1 SPX advancers vs. decliners on Thursday followed by nearly 6:1 on Friday ) showed that this market is about far more than one stock.

Today’s report includes a comprehensive review of the technology sector and key subgroups. My overall takeaway is that while the sector is definitely not leadership right now, the weakness is mostly relative and mostly about the multi-month pause semiconductors are in.

Software and cybersecurity continue to look attractive within the sector and there is plenty of strength in tech lower down the cap scale.

As for the market ex-tech, strength is everywhere. The most attractive area over the next month looks to be cyclicals, where several sectors, including industrials and materials, are just now breaking out of multi-month bases.

However, financials deserve this year’s reliability award. Tight credit spreads (meaning no recession) and a steepening yield curve (with the long-end holding up) has been an ideal environment recently and I see few signs that is changing.

It bodes well for the soft landing if you’re interested in that type of thing.

Finally, defensive and low vol have been on a roll but we won’t be adding to them in this month’s ETF trades because they are starting to get very extended and the upside for these slow-growers looks skewed to the downside.

This week’s report will review:

• Nvidia and the S&P 500’s technicals

• August performance

• Major sectors, indexes and ETFs hitting new all-time highs

• The technology sector and key subgroups

• September seasonality

• and more!