Weaker Consumer Data Lifts Stocks as Bond Yields and Key Resistance Remain Risks

The market is getting another important signal from the consumer. Retail sales came in at minus 0.6 versus an estimate of 0.1%, which was much weaker than expected. Online sales fell 2.2%, grocery sales declined 0.1%, and auto sales dropped 1.8%. Put that alongside the recent weaker jobs report and Consumer Price Index data moving closer to expectations, and we are seeing a consumer under pressure while inflation remains elevated.

That is changing the interest rate conversation. A week ago, expectations favored a possible Federal Reserve rate increase in September. Now there is almost a 70% chance the Fed does nothing in September, up from roughly 55% to 60% the previous day. October has shifted as well, with a 57% probability of no rate increase. The view here remains that the possibility of additional rate increases continues to fade through the rest of the year, with rate cuts potentially entering the conversation in 2027.

That backdrop is helping the S&P 500 Index (SPX). E-mini S&P 500 Futures (ES) were slightly higher after the index broke out of roughly a week of sideways consolidation. That consolidation formed a bull flag, and Thursday gave us the initial move higher. Mid-August through late August also tends to carry a neutral to positive bias as market volume becomes lighter.

The larger structure remains constructive. The S&P 500 broke above a major parallel channel connected to the 2021 bull market highs, came back to test that former resistance as support, and held it multiple times. The path of least resistance remains higher as long as that structure holds. The larger potential cycle high remains in the 81 to 8,200 area. Pullbacks can happen before then, but that area is where the risk could shift from the roughly 3% pullbacks we have been seeing toward a larger 10% to 20% drawdown.

The U.S. Dollar Index (DXY) is falling and attempting to break technical support, which is supportive for risk assets. The bond market is less encouraging. A $25 billion 30-year Treasury auction required approximately 5.216%, the highest interest rate on a 30-year Treasury auction in 25 years. The CBOE 10 Year Treasury Note Yield Index (TNX) was also flat to slightly higher even with weaker economic data and a declining dollar. U.S. debt was cited at $40 trillion, so longer-term borrowing costs remain an important risk.

In commodities, Gold Spot Price (XAU) is bouncing after Thursday's pullback but remains in a holding pattern. We need to see whether this consolidation develops into a bull flag and another move higher or turns into a larger retracement. Silver Spot Price (XAG) is in a similar position after running into resistance and beginning to consolidate.

West Texas Intermediate Crude Oil (WTI) is essentially flat and trapped inside a tightening wedge. The range has compressed enough that the risk versus reward is no longer attractive inside the pattern. A breakout should give us the next cleaner opportunity. Natural Gas Futures (NG) are slightly higher but still have not cleared $2.83 resistance. If price pulls back, the next support is $2.57. There is also increasing discussion about a European natural gas inventory shortfall heading toward winter, but technically we are still waiting for the breakout.

In technology, Applied Materials, Inc. (AMAT) reported very strong earnings but is moving lower toward important technical levels. $481.75 is the first area of interest, followed by longer-term trend line support around $458 to $460. That lower area carries more risk because another test would represent roughly the fourth contact with the trend line.

Reddit, Inc. (RDDT) is surging after being added to the S&P 500. The first major resistance is the gap fill near $178. If it clears that, the next level is around $186. Dell Technologies Inc. (DELL) recently reached the $505 to $510 resistance area, traded as high as $514, then reversed, closing at $494 and later trading around $490.

MongoDB, Inc. (MDB) has made a nearly vertical move and is now pressing into a longer-term trend line. That combination of rapid price expansion and major resistance increases the risk of a pullback.

Nu Holdings Ltd. (NU) is moving higher after earnings, but price has already reached an important pivot area. The more interesting level is the gap fill around $16.65. The Financial Select Sector SPDR Fund (XLF) is also near the upper boundary of its rising channel, an area that has previously produced larger pullbacks. JPMorgan Chase & Co. (JPM) and Bank of America Corporation (BAC) are showing similar resistance structures.

Finally, Bitcoin (BTC) and the broader crypto market are drifting lower, but Bitcoin remains above its major trend line. Another delay surrounding discussions on the Clarity Act is adding pressure, although positive progress could create a sharp squeeze across digital assets. XRP (XRP) is around $1, with significant support near $0.95 to $0.96.

The larger trends still offer opportunity, but several markets are now sitting near important support or resistance. This is where patience matters most: let price come to the level rather than chasing it after the move.