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RoboStreet – July 1, 2021
Plenty Of Fireworks To Move The Market In July
Following a solid close to June and the first half of the year, the stock market has some wondering if the best gains are priced in, or whether there is more to go. That’s a bit of a jump ball at the moment as the next FOMC meeting in mid-July will dovetail a whole host of economic data that will provide much-needed clues as to the breadth of inflationary pressures are having on businesses and consumers.
The market trades as if the Fed is on top of the situation, and to their credit, some commodity prices have pulled back with the exception of crude and natural gas prices, both of which are trading at or near 2021 highs. The notion of the Fed even thinking about tapering or raising short-term interest rates has supported a firm move higher for the dollar while at the same time depressing bond prices.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
This backdrop has fueled a rally in big-cap tech that has broad influence on the major indexes. At the same time, some of the bloom has come off the rose in the reflation sectors, which in my view, offers investors an opportunity to pick and choose some attractive ETFs and stocks that have undergone some healthy consolidation.
The $SPY continues to follow the path of least resistance. The technology stocks have taken a well-deserved pause late in the week. The reflationary stocks (energy, banks, materials, commodities, industrials) are ticking back higher, but continue to trade below their 50-day moving averages.
The $DXY has broken above $90.60 resistance and has confirmed it breaks out. The next level of resistance at $93.The $TLT mirrored the price action in the U.S. Dollar and the next level of overhead resistance is at $148.
The question on everyone’s mind- is this the beginning of the next leg up in the market?
Based on the steep correction in the reflationary stocks, strong dollar, and overbought technology stocks, the market is due for a correction in July. The $SPY short-term support level is at $425, followed by $420. The SPY overhead resistance is at $430. Even if the $SPY is able to trade above the $430 level, the market can only make incremental highs.
I would consider rebalancing the portfolio at this point to be more market-neutral. The second wave of the sell will continue for the next 2-4 weeks. Market corrections are never a one-way trade.
Based on our models, the $SPY can pull back 10-15% from the all-time highs in the next 2-4 weeks. Based on our models, the market (SPY) will trade in the range between $385 and $425 for the next 2-4 weeks.
With bond yields having pulled well off their recent higher levels, shares of financial ETFs and bank stocks have retreated accordingly. However, this pullback in the bank sector comes on the heels of the recent stress tests that showed America’s biggest banks passing with flying colors, able to withstand extraordinary recessionary pressures should they come upon the economy.
My AI indicators are pointing to fresh rotation back into financials that could have the sector testing the previous highs and extending higher if the market perceives inflation as stubborn and the Fed’s position more hawkish in the weeks ahead. There is already some early rotation back into the banks this week, and I believe it will build on itself next week and into earnings season. The Financial Select Sector SPDR ETF (SPDR) is the most widely traded ETF that is the best barometer of the health and direction of the sector. The top holdings comprise 55% of total assets and represent the best-of-breed banks, brokerages, and asset managers in the U.S., making for an excellent proxy trade for investors to work with.
When we apply our AI-driven Forecast Toolbox to XLF, we get a projected six-month price target of $51.78, representing a potential move higher of 40%.
Within the XLF, both JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS) are giving off some strong buy signals this week, where our AI tools are highlighting both stocks as near-term potential movers. The AI-based Seasonal Chart for JPM is showing a “Higher” probability reading for the next 20 and 40-day periods, making for a good directional trading opportunity.
These tools guide our selection process for our RoboInvestor advisory service that has a stellar track record going back to April 2018 when we launched the service. Our Winning Trades Percentage of 91.45% is testament to how accurate our AI platform is in finding high-quality trades that provide consistent profits year-after-year.
RoboInvestor is unique in that our AI models will identify the optimal trades in blue-chip stocks and ETFs in market sectors, indexes, commodities, interest rates, currencies, and volatility. Our system will provide long and short opportunities where we can take advantage of all market conditions.
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Give your portfolio an extra measure of wealth-building stimulus and let of power AI contribute to the generation of profits and long-term feathering of one’s nest egg. Getting the very most from what the market has to offer from all asset classes provides a market-tested and multi-faceted approach to making money using our AI platform that is always learning and always crunching data. Put RoboInvestor to work today and make the second half of 2021 a highly memorable time for wealth creation.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
*Please note: RoboStreet is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, MonthlyTrader, or RoboInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
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