Stocks opened the week strong adding on to the previous week's gains as we saw the buying continue through Wednesday. We finally saw some weakness starting Thursday until Jerome Powell spoke at the Jackson Hole conference and shed some light on the Fed's plans on tapering their record asset purchasing program. We have long talked about this being the biggest risk to the market. While Powell DID indicate the Fed would look to taper before year's end, he added an immensely important caveat, stating there is no need to raise interest rates as soon as the Fed begins scaling back their asset purchases. The market loved this little tidbit as investors were under the impression interest rates would rise as soon as the taper began. Powell's reasoning for delaying raising interest rates revolves around the pace of the economic recovery, the delta variant's effect on consumption, as well as everyone's new favorite term -- "transitory inflation."
This week traders will say goodbye to Summer Trading as volume expectations heading into the weekend are straight up putrid. Thursday and Friday this week are two of the most quiet trading days of the year historically. With stock's continuing to gain at all time highs though, there are plenty of setups out there. We've got another big week of earnings with a bunch of the software heavy hitters reporting like ZM, DOCU, OKTA, MDB among many other of our favorites.
From an economic data standpoint, towards the end of the week we have some important numbers. With the Fed being so data dependent regarding the taper schedule, these economic events being relatively more important for short term price movement. Friday we have non-farm payrolls which can give us an indication of the recovery from a hiring standpoint. A number above expectations would technically be good news, but with investors fearing the end of the Asset Purchasing Program by the Fed, good news could be perceived as bad news and vice versa.
Overall we had some great trading this week as we focused on the strongest names with actual volume and got rewarded for it. We need to do much of the same this week, but keeping expectations somewhat more muted after the incredible rally we got last week.