As we approach month end we see the short term bounce ending. The S&P became oversold (on the marker) and had to bounce to provide some reprieve (whether short covering or just by chance timing of month end). The month end rebalance feels like institutions are rotating rather than adding risk. This isn't a clear cut evening star pattern, I would like the top candle to be tighter for uncertainty but I think the general idea is there that supports the fundamentals. Earnings are coming up, inflation HAS been very high, inventory HAS been built up and the consumer is scared as ever - burned through their covid savings, bitcoin gains. Gasoline and food are as expensive as ever...
Short term (since we are looking a daily) we will probably see a new down trend, I expect for a couple of candles. If the trend lasts I think the next leg is going to be a capitulation - selling everything. I think we saw hedge funds go short, institutions have turned to bears the last leg down, and it is only the retail money left that remains to DCA. This next sell off could change all that. I think add (short) into the weakness especially over the earnings season.
NKE announced yesterday with beats, but worse guidance and we will probably see that as the optimistic case this quarter.
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Some other names joined in on commenting in the slow down, RH, BBBY, mostly retail exposed stocks.
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S&P starting to inch its way back, day by day. I've been seeing a lot of posts that the 1h of July is the most "bullish" of the year. There is limited single stock events and more eco data coming out in the near term.
Today's (positive) PMI figure told me, good data is bad for the market (fed starts dropping rates sooner). I think we will see somewhat positive economic data in the next two weeks (until earnings start coming out) and in this environment this may put pressure on the markets. CPI is expected to be a new high of 8.8%.
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Trade is moving aggressively against, cut 1/2 of the position and will add on the next red bar.
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Bringing back the short here. The evening star signal completed probably the next 1/2 candles. Feels like we are in a consolidation channel here - part of a bigger scope. Will look for a bigger trading window to determine the new trading scheme.
Great write up! totally agree. Any specific time frames or targets? CPI is July 13th and since last time was a new high it could still reach a higher peak. That could be devastating!
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@ehaag100, Hard to say - I'm not a pure technician so I can't say the exact target just of technicals- and I'm not sophisticated enough to calculate the pure fundamental target of the SPY but I've seen a range of 2800-3200 if you like the recession or stagflation case. I like to trend follow and trade within the trend.
If you put a gun to my head and set a target - for this short term pattern (evening star) I would target the bottom of the broadening triangle (~mid-360 today) as the first stop on our way down and then if the triangle breaks downward we would look for the lower 300s.
It's a good point on CPI - that could be the catalyst that takes us below 3600 on the index esp if we see an astronomical print, I do think this is probably the top of inflation cycle assuming we don't see another up tick in energy/housing - which has slowed considerably mid month. Today's GDP data (Q1 final revision isn't great either) consumption estimates halved suggesting consumer has been weak since Q1 - I expect the next set of releases to be a ****show.
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@quantitativetendies yeah as a consumer and small business owner I'm already seeing things slow and people i know are slowing. Of course its all expected but it means that news coming out is likely to be bad or at best neutral. Hope my own business survives lol
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@ehaag100, Not sure what your situation is - but now is a good time to make those preparations before sentiment actually sours, open up those revolvers, build the cash balance, trim unnecessary personnel, (maybe buy hedges/insurance). This is what the smart money (private equity) is doing. Good luck with your business.
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Do you expect markets to start trending downwards because of all the points you listed I wanted to put some monthly puts in.