Daily Commentary: August 05, 2025

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Bad News Is Good News

Posted by Pete Stolcers on August 05
www.oneoption.com

The Fed has breathing room to cut interest rates and the market rebounded from a weak jobs report yesterday.

PRE-OPEN MARKET COMMENTS TUESDAY – Last week the market tumbled from an all-time high after a substantial drop in employment. Inflation is relatively tame so the Fed has room to cut rates in September. This safety net will soften the blow from weak economic releases, but only to a point.

As we’ve seen around the globe, economic activity has been declining and central banks have been cutting rates for most of the year to no avail. Conditions continue to deteriorate outside of the US. The market will rejoice initially when it gets the first couple of rate cuts, but when growth doesn’t rebound, investors will get nervous.

It will take a few months of weak economic news to rattle buyers and we could be getting close to that point. ISM Services will be released 30 minutes after the open and this is an important number. As a survey it tends to be forward looking. After dipping into contraction territory two months ago, ISM Services clawed its way back into expansion territory last month (50.8). Analysts are expecting 51.5 this morning.

PLTR posted solid earnings yesterday and the stock is up overnight. This will fuel tech stocks. AMD will report after the close today.

From a technical standpoint, the market drop last week was the biggest we’ve seen in months. If the market struggled to recover yesterday it would have been a sign that profit taking is strong and that the selling pressure is building. That didn’t happen. The market shot right into the gap and by the end of the day, the gap from Friday was almost filled. The S&P 500 is up this morning and it will fill the gap.

Buyers are still in control and this rally will die hard. A drop in ISM Services below 50 would get their attention this morning. Anything above 51 will be embraced.

Overseas markets were up so there is a tailwind. I am sticking with very short term trades at this juncture. We are heading into a period of seasonal weakness and this is where the rubber meets the road. If the market struggles to get back to the all-time high, it will be a warning sign. If the market flies right back to it, we are going higher. If the market takes out AVWAPQ in the next week we are heading lower. I am going to wait for that outcome.

Support is at $625 and resistance is at the all-time high.

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