Well, one eye still on the White House Circus
The week is relatively quiet until the Jackson Hole Symposium later in the week. On the economic front, we have Durable Goods and New Home Sales.
Jackson Hole Symposium: From Thursday, (8/24) – Saturday, (8/26), central bankers, finance ministers, academics and other important finance people participate in the Jackson Hole Symposium, in Jackson Hole Wyoming. At the Symposium, we can expect speeches from Super Mario Draghi, Fed Chair Janet Yellen and many others from around the world. Comments from the central bankers can move markets. If they mention any change in policy or a time frame to the Fed unloading their balance sheet, or the ECB pulling back on its bond buying, we can expect a strengthening in the respective currency and a possible pull back in the broader markets.
The Apprentice, White House Edition: Another week, another instance of “Your Fired.” But the latest person to leave (Steve Bannon) had a reaction in the markets cause of his anti-globalization view which had the markets react. If we have somebody unexpectedly leave the White House such as Gary Cohn or the Treasury Secretary Steve (Street Fighter 2 sounding) Mncuhin, we could see a sell off again as Trump’s pro-business agenda could potentially be in jeopardy.
Another Draghi Speech: ECB President, Super Mario Draghi is also scheduled to speak on Wednesday (8/23), a few days before the Jackson Hole Symposium. Draghi could potentially mention that he will be ending Europe’s Quantitative Easing. If this were to happen, we would see the Euro weaken and also a pullback in the markets on both sides of the Atlantic.
So much for a quiet week. The last 2 weeks of the summer are the time when a lot of people go on family vacation (especially in the northeast) as camp is over for the kids, but school has not started yet, so families go away. And with it, we usually see low volume. However, algos could potentially be busy in an instant with anything coming out of the Trump White House, or from another terror attack, such as in Barcelona.
So Many PMI readings: Flash Manufacturing PMI readings from across the globe are due out this week. Traders will watch these readings as potential weak readings could cause central banks to take further steps to stimulate their respective nation’s economies.
Dow Theory: The Dow Jones Transports Average (Made up of 20 transportation companies) have been going lower the last few weeks while the Dow Jones Industrials Average has been going higher. With this divergence, traders have been paying attention to Dow Theory. Dow Theory states that when we see a divergence between the 2 indexes, in a reasonable time the Industrials average would likely follow suit. This would mean that we should see the Industrials, and the broader markets pull back. For more on Dow Theory, please watch my video from Nasdaq Advisory Live where I discussed the divergence we are seeing between the Dow Jones Industrials and the Dow Jones Transportation Average.
UK GDP Second Estimate: On Thursday (8/24), the UK releases their revised GDP or “2nd Estimate.” The 1st reading usually has the largest effect on the market, but if the reading were to surprise, we could see markets go higher, or lower. If UK markets were to go higher, we would see the British Pound weaken as it continues to negotiate on Brexit.