Over the next five trading days, we'll be saying goodbye to a couple of things -- trading for the month of August, as well as the unofficial end of the summer. That means we're at the high point of back-to-school spending, last-minute vacations and the like.
All of this will likely result in a low-trading-volume week. Also take into account last week's vanishing trading volume due to the Nasdaq outage, as well as the low bullish reading from the Aug. 21 sentiment-survey results from the American Association of Individual Investors. Given all of this the market will likely be capped in the coming week.
That rise in bearishness, and the drift lower in the market since its Aug. 2 peak, do work to explain the outflows from stocks as investors head back to cash. According to data from Bank of America Merrill Lynch, equity funds saw their first net outflows in eight weeks, totaling $12.3 billion. Of that amount, $10 billion alone came from the SPDR S&P 500 ETF (SPY). Bond funds also saw redemptions as investors moved back into cash. During the last few weeks, money market funds swelled by $22 billion.
What we need to remember is that, at times like these, the stock market tends to shoot first and ask questions later as folks follow a herd mentality. That's why one school of thought says to use the AAII sentiment survey as a contrary indicator when it swings to extremes. This strategy says, in other words, that you should buy when bullishness is extremely low and sell or trim back positions when it's excessively high. I'm not one to time the market -- I'd rather pick quality companies at favorable valuations that jive with my PowerTrend perspective. However, that rise in bearishness does hint at a rally down the road.
Between now and then, we'll need to wade through the pending congressional negotiations on the debt ceiling and a potential government shutdown, as well as digest slower earnings guidance in the S&P 500 group of companies.
We'll also be dealing with a few others things, such as the question of whether the Federal Reserve will taper quantitative easing in September. The Kansas City Fed is currently holding its annual Jackson Hole, Wyo., Economic Policy Symposium, but I'm not expecting any market-moving news. Absent this year, after all, are Fed Chairman Ben Bernanke, European Central Bank President Mario Draghi, Bank of England Governor Mark Carney and several Federal Open Market Committee members.
Otherwise, it would be nice if we could stop the world for a few days, as Modern English once sang -- but, as Real Money subscribers know, hardly a week goes by without some new information coming to light. While the economic calendar is a little on the slow side this week, we're still due to get the July numbers on durable orders and personal income and spending. I'll be looking for disparities in the durable-orders report as it pertains to last week's U.S. Markit Economics flash purchasing managers index, which showed a sequential dip in the overall index for August despite a monthly climb in new-order activity.
As we close out the last week of August, we're still set to see some earnings reports from a number of retailers. DSW (DSW), Tiffany (TIF), Express (EXPR) and Williams-Sonoma (WSM) are all scheduled to release their numbers, as are jewelry companies Signet (SIG) and Zales (ZLC). The bulk of the earnings reports this week will be clustered between Tuesday and Thursday, and will include some tech and industrial names, such as Avago Technologies (AVGO), Pall (PLL) and a host of others.
Here's a more comprehensive list for what's on tap in the week ahead:
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Economic Calendar
Monday, Aug. 26
- Durable Orders (July)
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Tuesday, Aug. 27
- Case-Shiller 20-City Index (June)
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Wednesday, Aug. 28
- Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
- Pending-Home Sales (July)
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Thursday, Aug. 29
- Initial and Continuing Jobless Claims (Weekly)
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Friday, Aug. 30
- Gross Domestic Product -- Second Estimate (Second Quarter of 2013)
- Personal Income and Spending (July)
- Personal Consumption Expenditures (PCE) Price Index (July)
- Chicago Purchasing Managers Index (PMI) (August)
- Michigan Sentiment Index -- Final (August)
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Earnings Calendar
Monday, Aug. 26
- Pearson (PLC)
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Tuesday, Aug. 27
- Avago Tech. (AVGO)
- Bank of Montreal (BMO)
- Brown Shoe (BWS)
- DSW (DSW)
- Regis Corp. (RGS)
- Tiffany & Co. (TIF)
- TiVO (TIVO)
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Wednesday, Aug. 28
- Brown-Forman (BF.B)
- Casella Waste (CWST)
- Chico's FAS (CHS)
- Dycom Industries (DY)
- Express (EXPR)
- Guess? (GES)
- Jos. A. Bank (JOSB)
- Joy Global (JOY)
- Shanda Games (GAME)
- The Fresh Market (TFM)
- Williams-Sonoma (WSM)
- Zale (ZLC)
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Thursday, Aug. 29
- 1-800 Flowers (FLWS)
- bebe Stores (BEBE)
- Big Lots (BIG)
- Campbell Soup (CPB)
- Corinthian Colleges (COCO)
- Fred's (FRED)
- JA Solar (JASO)
- K12 (LRN)
- Krispy Kreme (KKD)
- Pacific Sunwear (PSUN)
- Pall Corp. (PLL)
- Salesforce.com (CRM)
- Shoe Carnival (SCVL)
- Signet Jewelers (SIG)
- Toronto-Dominion Bank (TD)
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Friday, Aug. 30
