Monday Market Pulse
RLT Newsletter 6.14.26
Peace Deal Deja Vu
We saw some more bullish price action on Friday as Thursday afternoon’s momentum carried through and pushed the market higher.
I am writing this on Sunday afternoon, and we still have not seen a peace deal signed. Trump continues to say that one is coming, while Iran continues to say it is not. In other words, it is the same story we have seen dozens of times over the last few months. Trump says the conflict is nearing an end, the market rallies, Iran pushes back, and the market largely ignores it.
I obviously have no idea whether a deal ultimately gets signed. What I do know is that if and when it does happen, the market will likely rip. The primary reason would be the anticipated reopening of the Strait of Hormuz and the resulting reduction in concerns surrounding oil prices and inflation.
Of course, the Strait of Hormuz would not simply reopen overnight. There are logistical challenges, security concerns, mines, and other issues that would take time to address. However, markets tend to price in future expectations well before they become reality.
SPY: Bulls vs. Bears
If we assume a peace deal is not reached and we do not get another Trump-fueled rally, then the SPY chart remains in somewhat of a no-man’s-land.
From the bullish perspective, SPY successfully held the key $725 gap-fill support and has bounced from that area. That makes the $725 level even more important moving forward. Many key stocks have also held major support levels and appear capable of moving higher. As long as the market can maintain that support, new all-time highs remain firmly on the table.
From the bearish perspective, however, we could simply be completing the right shoulder of a larger head-and-shoulders pattern. SPY is closing right around both the 10 EMA and 20 EMA and has rallied back into a meaningful resistance zone.
Many key names such as NVDA, TSM, and AAPL still look vulnerable to further downside after resting and forming what could be bear flags. Other names, including AMZN and MSFT, appear to be attempting a bounce. However, if those bounces fail, we could see major support levels break, opening the door for additional selling pressure.
While I remain slightly more bullish than bearish on the broad market simply because the primary trend remains higher, a break below the June 9th low would be a significant bearish development. If that occurs, risk mitigation will be key.
SPY Daily Chart
Sector Rotation Worth Watching
One thing I find particularly interesting is that XLF, XLB, XLI, XLP, and KRE are all looking a bit more healthy right now. These sectors significantly lagged the broader market throughout much of this bull run, but we may finally be seeing some actual rotation into those areas.
JPM provided a particularly nice setup for traders who were watching it on Friday. The stock formed a double bottom at the April 7th gap fill, retested the neckline of that double bottom on Wednesday, and then gapped above more than 120 days of price action on Friday morning making it a great buy at open trade. For a bank stock, a 2.31% move in a single day is substantial.
JPM still has an open gap above near $328, which becomes the next upside target. As long as Friday’s candle low holds, that target remains active which makes this one a candidate for buying quick dips.
JPM Daily Chart
Microsoft
My favorite chart right now from a risk-to-reward perspective is MSFT.
I have traded MSFT particularly well this year, and it has become one of my favorite charts because of how consistently it has respected major technical levels. This time may prove no different.
For quite some time, I have been highlighting the buy zone around the 200-week SMA, the 50-month SMA, and the major gap-fill area. On Thursday and Friday, MSFT finally dropped into that support zone after printing ten consecutive bearish candles, the longest bearish streak since March when the stock was also testing the 200-week SMA.
Back then, the eleventh candle marked the reversal. I am not suggesting history has to repeat exactly, but we did have two notable lower wicks on Thursday and Friday, indicating that buyers are stepping in at the support area I have been discussing.
Because of that, I think a move toward $400 and potentially even $410 this week is a reasonable expectation.
That said, I still believe MSFT likely does eventually head lower. In fact, that remains my primary longer-term thesis. I continue to view the current structure as a larger C-wave decline. If that interpretation is correct, MSFT could eventually break below the April lows and potentially trade down toward the $284 area, where the 100-month SMA currently resides.
If MSFT were to reach the $300 area, I would view it as a great long-term investment opportunity and would be looking to accumulate shares.
For now, however, I am simply trading the high-probability setup directly in front of me. The risk-to-reward remains attractive, the support level is clearly defined, and the setup is one I have been planning for weeks.
I also think software names in general could attract buying interest, especially if the broader market remains bullish and continues to hold above the June 9th low.
MSFT Daily Chart
For a detailed look at the market and some of my favorite stocks, check out the Friday Swing Room below.