Pieces For A 10% Correction But No Bear Market
Happy 250th America! In true American spirit it will be hot as a firecracker in CT through July 4th, maybe a little too hot for me. Friday will be a good day to work in my ice cold office with Renee taking off in the morning and then sit in a pool after that. I can’t imagine wanting to play golf, but ya never know.
We have a new month and new quarter here with lots of stats and trends. Overall, July is up 1.5% when beginning in an uptrend like now. The first 10 days of the month typically see the NASDAQ 100 outperform. It didn’t yesterday and isn’t starting out well today. The first day of July is up almost 90% of the time. That failed yesterday.
This is Q3 and all year I have targeted new highs going into Q3 and then the scenario for a 10%+ correction. That scenario remains active and I need to do some more work as well as see more cracks in the pavement. Right now, the former sexy, high flying leaders are lagging, but other groups are taking up the slack. That’s bullish rotation IF it holds. And the NASDAQ 100 got right to that gap in the chart I wrote about the other day and failed.
Along with the NASDAQ 100, semis are failing after an historic run.
Supporting the bulls longer-term is the chart below which shows the S&P 500 in the upper panel and the NYSE A/D Line in the lower panel. Look at how strong the A/D line is against an index that cannot make new highs. That, my friends, is bullish beyond Q3. It says that declines should be bought and no bear market is beginning. I would even say that sans COVID, no 20% decline will begin either.
Finally, I know I am overdue some Fed commentary. While the country frets about the Fed raising rates, I am firm that no rate hike comes in 2026. In fact, the next move remains a cut.
On Monday we bought EMB, IJT, GDXJ, more PFF and more TSPY. We sold SSO. On Tuesday we bought PCY, GDX and more IJT. We sold AUGT, some MQQQ, some QLD and some VGK. On Wednesday we bought $AGG. We sold GDXJ, PCY, EMB, SIXF, QMAG, some OIH, some QLD, some MQQQ, some AGDYX, some AHTFX, some SVARX, some BXHYX and some BXFYX.
