Lots of Sideways Action – Could Lead to Another Leg Higher

With tech earnings season in peak mode, we are seeing huge moves in the prominent companies like Amazon, Google and Facebook, but overall, the indices have been relatively calm. The Dow and S&P 500 have been range bound and the longer this sideways action continues, the more likely the ultimate resolution will be to the upside.

Bears have been pointing to the poor action in the S&P 400 and Russell 2000. The problem is that they have been behaving poorly for some time and their laggard state is not a good timing tool for when it might matter. Additionally, we saw both mid and small caps jump sharply relative to the other indices on Wednesday. Perhaps this is nothing more than a blip, but if it becomes sustainable, that would give a nice boost to the stock market.

As I keep writing about, semis have really turned from goat to hero over the past 6 weeks, but really this month. They are very, very stretched and extended at this point. Some pullback is expected. The longer they can go without giving too much of the gains back, the more likely another leg higher is coming. Banks have woken up to follow their diversified financials cousin and while I don’t think they will become market leader anytime soon, they could certainly give the overall market a boost if they got going to the upside, something that hasn’t happened in a long time.

Finally, junk bonds have been consolidating for most of July and they keep percolating. This is yet another group where time is wearing off the overbought condition and could lead to another leg higher later this quarter if all goes right.

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Paul Schatz, President, Heritage Capital
Paul Schatz, President, Heritage Capital
If you have at least $250,000 of investable assets and would like to schedule a complimentary meeting, call, or video conference with me, please click on my calendar here email me at Paul@investfortomorrow.com or call the office directly at 203.389.3553.

Comments

  1. Marc J Mosqueda says

    Sounds good Paul and I will be trading the usd/jpy dollar-yen to build up my cash Inventory with real money Oanda account. The futures /6j contracts trade opposite its currency pair. This was stated by Bob Iaccino CME Group. I will keep my eye on the 10 year Treasury Note as they affect the Banks Interest rates and also affect our municipalities the Infrastructure of the United States. We live and trade in a global economy now with this ongoing war with China. The Euro Zone is always in play along with with crude oil /cl my opinion.

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