Monday Market Milestones
RLT Newsletter
The markets bounced back from last Thursday’s selloff after finding support at a key technical level. QQQ bounced almost perfectly off the point of control from the March low, as well as its 50-day SMA. While QQQ and the technology sector continue to show some relative weakness especially in semiconductors, we’re also starting to see constructive price action that suggests the historically bullish month of July may once again be playing out.
SPY is beginning to push out of its triangle pattern, while QQQ remains trapped near the center of its own consolidation, again due to semis. A strong close above the upper trendline and above Thursday’s high would be a big signal that buyers are regaining control and would increase the odds of a strong summer rally.
If, on the other hand, the breakout fails and we eventually break down from these triangle patterns, I would expect a larger retracement that could take price back toward the 100-week SMA or a retest of the prior all-time highs on both SPY and QQQ.
QQQ Daily Chart
One sector that continues to rip is financials. The double bottom in XLF has now played out, with the ETF filling its overhead gap as of Monday morning. After lagging the broader market through much of the spring rally, financials have finally caught a bid and now appear to be making a run toward new all-time highs.
AXP continues to look strong and is pressing higher, with the primary target remaining the overhead gap. COF and WFC are still sitting near their double-bottom necklines, making them attractive entries from a risk-to-reward standpoint. If financials continue to lead the market higher, both have plenty of upside potential.
Keep in mind that the big banks begin reporting earnings next week, officially kicking off another earnings season that will likely play a major role in determining the market’s direction for the rest of the summer.
COF Daily Chart
With most sectors still looking constructive and seasonality continuing to favor a strong July, the bullish case remains intact as long as key support levels continue to hold. My focus remains the same: buying pullbacks in strong stocks while also looking for opportunities in beaten-down names that appear to have completed their bases and are beginning to trend higher.
Check out the video below for a deeper dive into the major indexes, Bitcoin, and several of my favorite trade setups right now.