Week of July 3
Bull market has legs?
Recap of last weeks action:
Last week was massive for us. Low of the week was 4328, we closed at 4450. 1 trade given. No throwing shit at a wall and seeing what sticks. Again you dont have to top or bottom tick the move, in fact you will rarely if ever do so. If you caught 1/3 or 1/2 of this move you made a ton of money.
Next move for markets?
Up. We are back in a bull market. I see no reason for this market to retrace significantly for the time being. Go with the flow. Stop fighting this if you are, and go long.
Image A: Eco surprise almost vertical.
Sure there is some FOMO and positioning involved in this rally, but do not be fooled that this is all this is. The economy remains strong, the mythical recession to come has still not arrived. Will it ever? We will see. But GDP this past week was revised up, and inflation continues to fall off a cliff. At the end of the day, this is looking like a soft landing is coming, or even no landing. That is what the data is showing, real time.
As I mentioned in last weeks post, we had a bit of a technical overhang, a headwind from funds having to sell equities to rebalance their portfolio to maintain their 60/40 exposure. That is all done as of June 30. On the contrary, we now have a tailwind of new funds being deployed as the start of a new quarter begins, that is new money coming into the market that will go into equities. Some of this was front run for sure, but the flows are inevitable, and will produce an impact.
Image B: Monthly inflows during July are very robust.
Last but not least, we are entering an extremely bullish seasonal window. This has been an extremely bullish year, Nasdaq with the best first half ever. In its entire history, this is the best start to a year ever. Let that sink in. So we are entering the most bullish 2 week period of the entire year, in the most bullish start to a year ever for the Nasdaq. Dont overthink it.
To sum up, go long here and don’t overthink it. We just closed over 4400 resistance, seasonality is extremely bullish, flows are extremely bullish, and this year has been extremely bullish. Dont see that changing.
Trade ideas:
Get long futures or TQQQ or SPXL. Buy an dips towards $4400 SPX using July 21 4500 calls.