Week of July 6

Is the bull case for AI broken after early July weakness?

Recap of last week

In the last couple of weeks, we called out the pension fund rebalancing in late June as a reason to be cautious on stocks, then last week we said buy the dip. Both calls worked out very well.

As usual, we waited patiently for the perfect setup, this time it was a dip buy the morning Warsh spoke, at 7513. We booked a 50 pt gain and some runners that were stopped out but was good for up to 80 points.

The calls we are still swinging, for now.

Last week, despite SPX finishing up just shy of 2% on the week, quite a strong week, it was notable SPX and NDX both closed red on July 1 and July 2. Historically, the odds for both these days to be green are over 70%. As in the first day of July and the last day before Independence Day. So it was unusual. Anytime the unexpected happens in markets you have to wonder if something has changed in the trend.