Major averages rebounded yesterday on lower volume after Friday's hawkish viewpoints were reversed to some extent by a Fed member. To some extent the reflex bounce was "logical" after the NASDAQ had undercut an early August low on the morning gap-down open.
Yesterday, Atlanta Fed President (non-FOMC voter) Dennis Lockhart indicated that incoming data warrants a serious discussion regarding a potential interest rate hike. Minneapolis Fed President, and non-FOMC voter, Neel Kashkari made somewhat dovish remarks that there doesn't appear to be any huge urgency in acting, but that he continues to pay close attention to incoming inflation data. Federal Reserve Gov. Lael Brainard also called for prudence in raising interest rates. Brainard is known to be in the dovish camp.
As a result, the fed funds futures markets signaled that the implied probability of a rate hike at the September meeting fell to 11% from 19% earlier Monday morning. It is not until the December meeting that fed funds futures place the odds of a rate hike at roughly 50/50.
We have mentioned the following stocks in prior reports: WB, MOMO, and NTES
They have been on our Focus List as ones to watch for buying on constructive pullbacks. On Monday, each pulled back to its respective 20-day moving average then had a pocket pivot off that moving average.
A few other stocks on our Focus List had pullbacks to support at their 20-day moving averages and then bounced, such as ACIA, BABA, LN, and TWLO, for example. In each case, investors would have been smart to sell into prior strength which would put them in a better position to buy back on such pullbacks although it requires some intestinal fortitude. This is the "Ugly Duckling" at work in this market, where stocks will bounce off of support levels when things look their ugliest.
Futures are down sharply again this morning as the "whip and the saw" begin to dominate the action ahead of next week's Fed meeting.