Back to School Equals Back to Basics

As opposed to the rest of the country, here in the northeast the Labor Day holiday, as much as anything else, is synonymous with K-12 schools kicking off the new year. 

And with that new school year of education one has to wonder if the market, itself, will get back to basics. 

Specifically, bearish chart patterns have mostly become so unreliable over the course of a multi-quarter/year/decade melt-up at numerous times that they have become the butt of many a joke. After all, how many times have we seen potentially bearish setups, oftentimes quite technically attractive coupled with many headwinds for the market, to boot, only to then see a massive overnight gap up in the futures which effectively ignited a squeeze to new highs?

It has happened too many times to count, which naturally perpetuated the melt-up and has led many to believe that old-fashioned technical analysis is as dead as disco. 

Over time, however, the more markets seem to change the more they stay the same--Human emotions never change over a long enough timeline. And the same caution-to-the-wind mindset we have seen among market players is not new to Wall Street. 

On the updated Nasdaq Composite daily chart, below, we have a summer-long head and shoulders top with weakness to kick off the seasonally bearish month of September. The Nasdaq is losing its 50-day moving average as we speak, with NVDA and the semiconductors as a sector leading tech lower. 

I noted in my usual Morning Prep Video for Members this morning that the consensus sentiment seemed to be that the market would stage a final rally into the September 18th FOMC likely rate cut. However, my sense is that the market has already priced that in this summer during the May/June/July rally. 

And now what is left is an economy threatening stagflation, despite Fed Chair Powell's insistence that is not the case, which we know historically means PE ratios need to go much lower due to margin compression. 

So, again, the pertinent issue is whether markets get back to basics and formidable technical patterns confirm lower this time around, just when it seems like even mentioning them is a sucker's bet.