The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Breakout
Hope springs eternal for a Strait of Hormuz deal and that hope is getting credit for today’s stock market rally. I don’t find the US/Iran stories to be that compelling but crude prices did fall, as did Treasury yields. Those moves certainly helped equity bulls. Answering the why question behind today’s rally is difficult. The what question is easy. The S&P opened +40 and climbed, almost without interruption, into the afternoon. We hit new all-time highs on the open, and made fresh ones seemingly every minute thereafter. Capital flow was slightly elevated at 108%.
Chart watching gets little respect yet almost everyone does it. Today’s pop looks like a breakout to the upside and the continuation of the bounce from last week. That’s an obviously bullish short-term pattern. If one looks at the chart from a medium-term standpoint, today’s rally confirms a breakout above the consolidation trading since late May. If one looks at the chart from a longer-term standpoint, today’s rally looks like a resumption of the full bull market.
You don’t need to study technicals to see these things either. Just look at this chart and ask yourself, “where does it look like the market is going?”We are not far away from that level. Dip-buyers made their moves last week and now the rest of the market is going to work. Certainly the momentum players are back at this point too. After the past two months of choppy trading, it looks like we could be at the beginning of a run to the upside. It would not surprise me to see and consecutive sequence of only positive prints. That’s been the M.O. of the market after a bounce and with both price and sentiment bouncing, the follow-through seems likely.
In this case, it’s not rocket science, signs point to up
Let’s check in on some investor groups.
The shorts got squeezed out.
The dip-buyers went to work last week and were vindicated yet again.
The traditional equity allocators already put end-of-month and beginning-of-month flows to work.
The momentum guys joined the party and grabbed some gains, after two months of chop.
The tech/AI people just reinvigorated their narrative.
This is quite an intersection of market participants, all of whom are coincidently bullish. It’s no wonder there’s a fresh chase to the upside.
The question is when it peters out. I don’t think immediately but I think the biggest gains just printed. There’s probably still good upside to go but I think it’ll be less bonkers for a while.
See you tomorrow.
-Mike
Visdom Market Commentary
IMPORTANT INFORMATION
This is general educational information and market commentary and is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.
All market and economic data herein is as of the date hereof and sourced from Bloomberg unless otherwise stated. The information is subject to change without notice and we have no obligation to update you.
This general market commentary is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The views and opinions expressed constitute the author(s) judgment based on current market conditions, are subject to change without notice, and may differ from those expressed by other employees of Visdom Investment Group LLC ("Visdom") and Visdom. Past performance and any forward-looking statements are not guarantees of future results. It is not possible to invest directly in an index.
We believe the information contained in this material to be reliable and have sought to take reasonable care in its preparation; however, we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. Any securities referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by Visdom or by the author(s) in this context. The information presented is not intended to be making value judgments on the preferred outcome of any government decision. This information does not constitute Visdom research, nor should it be considered a recommendation of a particular investment strategy or an offer or solicitation for the purchase or sale of any financial instrument. Investing involves market risk, including the possible loss of principal. You should speak to your financial advisor before making any investment decisions. Visdom and its affiliates do not provide legal, tax or account advice so you should seek professional guidance if you have questions.
