American markets appear poised to take a break from their months-long rally. The first signs of a correction had been evident since the beginning of the week. Thursday saw a sharper sign. I had quite anticipated a correction in August. It's also a bad month, period. Investors are going on vacation and trying to accumulate some cash. There are many reasons for this. Powell's statements on Wednesday were quite hawkish. I didn't like them at all. When you read the details, there are some rather hawkish remarks. He kept interest rates steady that day, while there were expectations of a definitive interest rate cut in September, which he poured some cold water on. All of this is affecting the markets right now. Of course, Trump dropped some new bombshells on Thursday. I'll focus on that.
On the other hand, there's actually very good news regarding crypto. But I think crypto investors are looking at a shorter-term perspective right now. The Securities and Exchange Commission (SEC) has very important plans for crypto. I'll focus on that as well. Meanwhile, earnings continue to flow. Apple reported a much better-than-expected earnings report on Thursday. Amazon delivered a pretty good earnings report, but there was a slightly troubled area. But the markets didn't pay much attention to them. In other words, we didn't see the same enthusiasm we saw after Wednesday's Meta earnings report.
What's happening, what will happen? I'll evaluate all of this for you in US stocks and cryptocurrencies. First, let's take a technical look at the markets. So, this week, three candlesticks in a row are quite unpleasant. Because we start the day with a good rise. Then we lose momentum. For example, we started Thursday with very strong momentum. Meta and Microsoft's earnings were very good. That took the stock market up considerably. But stocks other than Microsoft and Meta didn't follow suit. Even microchip stocks, which I believe would be very positively affected by those earnings, sold off. As a result, the stock market closed in the red on Thursday. And quite badly, in the red. That is, near the bottom of the day and broke the 10-day moving average. After such declines, we expect it to test the 21-day moving average. If there's trouble there, it could fall to the 50-day moving average.
Of course, a test of the 21-day moving average could probably predict 6200 levels here. Let's also look at the Nasdaq. So, we've had an incredible rally so far, consistently trading above the 10-day moving average. But Thursday's candlestick is quite unpleasant there as well. We opened with a very strong rise. We saw an all-time high. It renewed its all-time high. It then closed lower. It seems a test of the 21-day moving average is also possible. So, these are normal things, by the way, so far. So, there's not much news that will fundamentally disrupt the markets. There is some negative news, but the market is currently choosing to sell off rather than absorb negative news. Seasonality plays a significant role in this. A slight correction after such a rally is perfectly reasonable, but there are also some news streams that accelerate it. Now let's look at them.
There's an influencer I follow on Twitter and YouTube, @amitinvesting, who I like. He makes market opening and closing videos every day. He's very active. He says, "August is a difficult month, especially during election years. It's not just August; September is the same. The problems continue until October. July is historically an extremely strong month. Of course, there's no guarantee it will repeat itself. But when statistics are this strong, traders tend to take profits even more. I don't see a significant structural change in the markets, but there's a seasonality to it. Because that seasonality has been talked about for a long time, it's turning into a self-fulfilling prophecy, and people are taking even more profits."
So, what was the news cycle that caused the chaos? Of course, aside from Powell's statements, Trump made another announcement about tariffs on Thursday. As you know, those postponements ended on August 1st. Now, while he granted another week's postponement, he also imposed tariffs. He slashed Canada by 35%. He even imposed new tariffs on countries with which he has reached customs agreements. He's trying to squeeze things a bit. The market didn't pay much attention to this at first, but it was amidst the day's negative news flow. This also took place after Powell's statements.
Another problem was Thursday's PCE inflation data. 2.7 was expected annually, but it turned out to be 2.8. Markets didn't like that either. When I looked at the specifics, for example, there was a significant increase in durable goods. These are affected by tariffs. When this came in so high, the market said, "I think Powell is right." Inflation could rise. I don't think so. This will soften in the coming months, but I mean, the market has seen it right now. Also, new unemployment claims came in on Thursday. They were very low. So, there's no problem with employment, and there's a slight upward movement in inflation. Powell had already spoken hawkishly. So, things will continue this way, and interest rates won't fall.
On the other hand, companies are reporting very strong balance sheets. Meta's balance sheet was exceptional. Microsoft's was exceptional. Google's was exceptional. In other words, they brought very strong balance sheets. Apple's balance sheet on Thursday was also much better than expected. So, we've seen the most significant revenue growth in many years, around 10%. Sales on the mobile phone side were quite good. Services were quite good. So, it was much better than I expected, but there are some concerns about Apple. As you may know, the government is filing an antitrust lawsuit against Google, and this is significantly impacting Apple. Google is included as the default search engine on Apple devices. The government is trying to prevent this.
Google pays Apple a significant amount of money to become the default search engine. This is where a significant portion of Apple's profit comes from. If that deal falls through, will Apple lose money? That's one concern. It's also believed to be lagging behind in artificial intelligence. These two concerns are why Apple's stock, despite performing quite well, hasn't moved much higher. When markets want to see the downside of something, they start to see it. Depending on the market's current mood, they tend to choose the upside or downside of news. For example, MicroStrategy made an incredible profit on Thursday, but it seems to have fallen slightly. Market mood is somewhat affecting things.
Now, regarding crypto, that surprises me, frankly. It's about crypto because there's very good news. The Securities and Exchange Commission's chairman, Paul Atkins, is introducing very serious new legislative proposals, and these will be very beneficial for crypto. However, I think investors are a bit more short-term oriented and taking profits. Ethereum, for example, has made significant profits. While Bitcoin hasn't performed as well recently, it has also been making significant profits since the beginning of the year. There's also a bit of a profit-taking period. And Powell's policies seem to be a bit of a pain. Because of all this, the profit-taking trend is predominant in crypto. However, things are very positive on the back end.
The regulations the Securities and Exchange Commission chairman is trying to introduce, and push for adoption, are extremely beneficial. They published a 160-page report. They called it "Project Crypto." There are extremely positive developments regarding stock exchanges. In other words, the powers of these exchanges are being expanded. They are allowing them to tokenize and sell their stocks. So, there are positive developments in this area. There are strong incentives for stablecoins. The US is strongly focused on this. This is because stablecoins are generating demand for treasury bonds. This strengthens the market. When you launch a new cryptocurrency, you know, whether it should be registered with the SEC or a commodity are always debated issues. Because if it's registered with the SEC, it's subject to a very heavy regulatory burden. Many cryptocurrencies can't withstand this. There wasn't any clarity on that. He's offering clarification. However, he's doing some very positive work, but the market isn't interested in that right now. It's focused on the short term. There are also new regulatory relaxations regarding the mergers and collaboration between traditional banks and crypto, and even traditional banks and decentralized markets. So, there's actually some great things going on behind the scenes, but the markets have been a bit more short-term focused these days. That's why my long-term view on crypto hasn't changed. I see a bright future for cryptocurrencies like Bitcoin, Ethereum, and XRP, which Wall Street is particularly focused on, but it looks like there will be some pushback in the short term.
What do I think? August and September could be challenging. In other words, we've come a long way, both technically and periodically. Could there be a sharp pullback? It's hard to predict, but frankly, I'd be happy with a 5%-10% pullback in the S&P. I've already set aside some cash and can build new positions. It's also healthy, in that it allows money that's been sitting on the sidelines to enter the market. It's moving so fast that people are starting to lose interest in buying. There's also a lot of money sitting on the sidelines. I think this is a positive aspect. Investors should view these corrections as a fundamental element.
I never try to time these perfectly, selling and buying all my shares. I want to increase my profits to a certain extent and adjust to declines. I still think the US is trending positively until October, but we could face a bit more challenges. If you don't want to sweat the summer months, I believe you can increase your precautions a bit. Employment data could change things a bit. Any clarification on tariffs, such as another week-long postponement, could change things. I don't know; it's hard to be sure. There's no guarantee of a decline every August or September. That's why I never switch to full cash. I always try to do that. I'm planning to increase my cash ratio a bit more now. If things get any worse, I'll strengthen my hedges a bit more.
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