Early July strength arrived on cue. Stock rallied smartly
off the June lows until bumping into resistance today near the 50 DMAs and
recently broken support levels around S&P 3900. NASDAQ led the charge up
9.3% since the June 16 low through the close on Friday, July 8.
We have been honoring our stops all year long sidestepping
much of the carnage, which has put the majority of our portfolio in cash. We
are in no rush to jump back in. Our indicators are still flashing caution signs.
Seasonally we are in the worst months of the year and July is
weaker in midterm years. Fundamentals are shaky, Atlanta Fed’s GDPNow latest Q2
estimate is -1.2%. Technically this looks like an oversold bounce with old
support levels transformed into resistance and pre-pandemic levels in play. Inflation
is still surging, and the Fed is still hiking. Consumer sentiment and market sentiment
are still trending lower.
Our outlook is for continued weakness, volatility and likely
lower lows. Cash is our main position for now. You don’t have to always be buying
or selling positions. Cash gives you time to think. But we expect the Fed to be
wrapping up this aggressive tightening cycle in September ahead of the midterms
right on time for the midterm bottom and the “Sweet Spot” of the 4-year cycle.