Turning Bearish. July is the best month of the third quarter, but performance in pre-election years has been uninspiring. First half of July likely to be better than second half. NASDAQ’s midyear rally ends on the ninth trading day and July is the beginning of NASDAQ’s “Worst Four Months.”
Rebounding. According to Investor’s Intelligence Advisors Sentiment survey bulls are are at 53.3%. Correction advisors are at 28.6% and Bearish advisors are 18.1%. At this level sentiment is in the grey area between neutral and cautious. This suggests it is neither a great time to be buying or selling, instead holding is most likely the best action. Keeping a toe in the exit door may also be a fine idea as well.
Reasonably firm. Final Q1 GDP for the U.S. came in at 3.1%. Q2 estimate from Atlanta Fed GDPNow is also hanging in at 1.9% which has been adequate to keep the bull market alive throughout much of its life. Employment remains solid with 75k jobs added in May. Soft areas include tepid inflation (Fed’s preferred metric), corporate earnings, housing, autos and consumer confidence. Soft, being the key word.
Meandering? DJIA, S&P 500 and NASDAQ look to be slipping into a holding pattern while awaiting new info regarding any trade deal with China. All three indexes are near their respective all-time closing highs, but a catalyst to breakout and move on is lacking. A decisive move to new highs by DJIA, S&P 500 and NASDAQ would suggest further gains otherwise more of the same up/down/sideways trading is likely to continue.
2.25-2.50%. For now that is. Many signs point to a cut in rates as soon as July. Apparently, the Fed is getting past the notion that rates should be higher because they used to be. In reality the market’s mini meltdown in May and persistently below-target inflation are the real reasons for an increasingly dovish stance.