The running of the bulls...

Well, at least that was what things were looking like when the Golden Cross hit earlier this month.  As discussed in our prior blog, there was a breakout in consolidation as the early parts of the re-opening got underway and the July earning season started to kick into high gear. Additionally, July historically tends to be one of the better performing months in the year.

Looking at the screenshot below, we can see the Golden Cross for SPY trigged on 7/9/2020 and the MACD crossed over into bullish territory.  Even small-caps (IWM) saw a breakout.

Two weeks later

And just like that to close out the month, July got hit with a brick wall.  In fact, SPY has been trying to move into the upper 322 resistance area since early June.  It finally broke out this week but today it fell right back through into the 200 SMA support line.  Below is a screenshot of the failed attempts, breakout, and finally the slide back down into support.  If we look at the volume during the breakout, it was low.  This would indicate a very weak rally that just could not support the upward momentum to push it higher.

Daily Market Readings

Prices on Monday moved higher with news that multiple vaccines had done well in phase 1 testing.  However, prices started to consolidate during the week and with news of surges in Covid-19 cases, the situation at the China consulate and economic turmoil sent the index lower.

By the end of the day, the Nasdaq QQQ daily technical readings were all in the red.  Even the weekly readings which were bullish are turning bearish.

Defensive positioning

On the flip side, commodity assets such as Gold, Silver, and Bonds are trending up.  Both the weekly and daily technical reading for GLD has been all bullish.

Summary

This week marked a notable reversal from the July breakout.  Nasdaq 100 was at an all-time high on Monday but feel 4.3% since.  Tesla and Intel dropped lower and small caps fell as well.  From a technical perspective, this looks like a correction in the making.  Gold, silver, mining, and other segments are looking like they will outperform in the near future.

With the market about to enter the seasonally "weak" two months of the year and U.S jobless claims at all-time highs, it will be telling to see what the Fed may do next.  Interest rates are currently near zero and may remain there for a few years.  The Fed may move to keep long-term yields low for a longer duration.

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