That seems to be the mantra of every guru in the universe of late when talking about the tech stock universe including the NASDAQ 100 and MNQU24 (micro NASDAQ 100 September 2024 contract).
Even though I had to roll over contracts, it appears that within a week or so if time symmetry hangs on generally, we will hit out targets we saw months ago.
We will likely see the AB=CD pattern complete right around 22027.75, just short of the 141.4% retracement at 22441.46. That could be an alternative swing high should the AB=CD target get blown out, but only time will tell.
There could be a great deal of wrongheadedness about continuing to be bullish. Let’s look into this.
What is wrong?
I guess you could say that mixed signals are everywhere, and they tell different stories and that makes the bullish story look a bit bizarre, even as there is weakness in market technicals.
As shown in the Game of Trades video, only a handful of stocks are propelling the $SPX and the QQQs higher. Market breadth in terms of stocks making new highs is not strong universally but in stocks like NVDA 0.00%↑ , AAPL 0.00%↑ and MSFT 0.00%↑ , their strength alone is enough to drive the $SPX higher. ( I do not endorse Game of Trades, but their videos are quite instructive on market technicals.)
Dow Theory is already indicating that transportation and utility stocks are becoming weaker and that tends to presage weakness in the Dow Jones Industrial Index. Will that follow through? We simply do not have the answer there, but it is worth watching as we move through the second half of 2024.
Even as Jaime Dimon is bearish on the market, he has fired his chief market strategist at JP Morgan, Marko Kolanovic for making bearish calls on a market that refuses to pull back. That is of course what happens when you are not the boss and make bad decisions. Jaime Dimon has dodged more bullets than Superman, but when the investment division performs poorly, he has control of the trap door for employees.
Despite what looks like typical cycle bearishness from Dow Theory and market breadth, seasonality shows that the first half of July is one of the most bullish times of the year, as demonstrated by Ryan Dietrich:
The other thing that tends to favor bulls is the summation index that was created by Tom McClellan has bottomed, as shown in this tweet. To read more about it, check out this Investopedia link. The only effective way to look at this index is in the rearview mirror after 6 months, but it does provide good benchmarks for expanding breadth, and it could indeed be signaling more strength ahead, at least in the short run.
The Economy Does Look Weak Though
Michael Gayed, CMT, has expressed how the ISM Services Index signals warning signs of a recession. The drop shows that we are seeing a fairly deep decline in U.S. economic activity over the last 12 months.
This drives another “bullish” argument for traders. What does a recession imply? You got it, a drop in interest rates. What does that mean? Cheaper money, lower interest returns, and potential demand for more money to be invested in stocks.
Many of the economic events and government policy shirts that are perceived to demand a cut in rates keep the perma-bulls in place and stay in the climb of the “wall of worry” that the stock market provides. As long as there is a chance for lower rates, buyers will continue to reach for the asking price and drive stock prices higher.
Is inflation dead? I would say NO, but I will deal with that issue in another post.
Conclusion
Will the market go higher? It could at least press out my target on MNQU24 before potentially pulling back. After that, we will simply have to watch things.
I did not have the time to develop a case for the continuing fight between the U.S. Dollar and the BRICS nations and their plans to walk away from the greenback. but it is something we need to go into in depth in the weeks and months ahead.
That is all for now. Thank you for continuing to support The Buffalo Trader’s Writing Desk! As the months move forward, I will try to increase the amount and variety of content here.