The market sold off hard today brought down by China’s announcement to impose tariffs on US goods beginning September 1, and tweets from the White House slamming Fed Chair Powell’s monetary policy and ordering companies to find alternatives to doing business with China. Powell’s much anticipated speech at Jackson Hole rallied the different indexes back to the flat line, but the President’s bashing sent the market sharply lower midday, and market closed just off the lows of the session. Every sector was down more than -1% with Energy (XLE) and Technology (XLK) leading the pack lower, down by more than -3.3% each. Semiconductors were one of the hardest hit market groups and the Philadelphia Semiconductor Index tumbled -4.36%. The DJIA tumbled 623.34 points (-2.37%) and closed at 25628.90, while the S&P 500 dropped 75.84 points (-2.59%) to 2847.11. The tech heavy NASDAQ lost 224.71 points (-2.81%) finishing at 7766.68.

The Bears were in complete control with declining issues beating advancing issues better than 6:1 on the NYSE and almost 5.5:1 on the NASDAQ. Volume picked up and declining volume was 90% on the NYSE and 84% of the NASDAQ. VIX jumped 3.19 points (+19.12%) and finished at 19.87. Crude oil prices fell 1.45 (-2.66%) and the September contract closed at $53.88 a barrel. Gold soared 28.40 (+1.88%) and closed at $1536.80 an ounce.

It was an ugly finish to what had been a positive week. Looking ahead, we should start seeing Q3 earnings ratcheting down due to slowing growth and the trade war and that should keep downward pressure on stocks and the major averages below their previous highs. Although low rates can limit downside, if the yield curve remains inverted it opens the door for additional weakness. As mentioned over the past few weeks, the stock market could be stuck in a trading range until we get clarity on monetary policy or some trade resolution but the current projection for the broader market is lower. Look for the S&P 500 to trade between 2825 and 2945, while the NASDAQ moves between 7700 and 8100. If those support levels break the next support comes in at the June lows, 2730 for the S&P 500 and 7305 for the NASDAQ. For the DJIA, 25500 is the bottom of the range with secondary support coming in at 24750.

Earnings releases to watch for on Monday include: Caleras Inc. (CAL), Fang Holdings (SFUN), LexinFintech Holdings (LX) and OSI Holdings (OSIS).

By David L. Blake, CMT