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MarketSurge powers the charts in this video.

They say you have to pay special attention when the market doesn’t follow the usual seasonal patterns. We might be in such a situation right now. August and September in the second year after the presidential election are typically considered a weak period for US stocks. The Nasdaq 100 just hit new all-time highs last week after a brief dip below its 20-day moving average. Not everything is hitting on all cylinders. There are plenty of mid and small-cap stocks under pressure while select mega-caps are carrying the load. AAPL was the big difference maker last week for QQQ. Tim Cook finally announced that Apple wants to commit to investing heavily in US manufacturing. This was enough to lift the stock more than 10% higher. Palantir (PLTR) crushed earnings estimates again and made new all-time highs. GOOGL is making higher lows and higher highs above its rising 20dma. TSLA gained 10%. Those moves were enough to mask the chopiness and rising volatility under the surface. The saying that bull markets correct through sector rotation was proven right once again. When a few leading stocks take a breather to pull back to their 20 or 50-day moving averages, other stocks perk up and keep the indexes relatively unscathed. 

We are in a stock picker’s market. There are still plenty of stocks that are breaking out to new highs after earnings, then consolidate for a short period of time and continue higher. There are also plenty of stocks that gapped up and then quickly faded or were completely crushed this earnings season – just look at the damage in cybersecurity and software stocks lately. This market is picking its spots.

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MarketSurge powers the charts in this video.

The indexes might’ve hit their annual high already, at least for the next few months. US stocks tend to struggle in August and September, particularly in the second year after elections. Seasonality might sound unserious to many, but so far, the market has been following the script relatively closely. It would be irrational not to pay attention to it. 

This doesn’t mean that there won’t be any stocks making new highs and advancing. After all, bull markets are stock pickers’ markets. There are always stocks that significantly outperform the averages. The one major trend so far this season is the strong performance from companies related to AI, ranging from data center components to energy sources.  We saw it again last week with big moves in META, CDNS, CLS, GLW, MPWR, MSFT, NVT, RMBS, SANM, etc. I am not saying to go and chase those stocks. Most are extended and need time to set up again. The pullback to their 20 and 50dma are likely to attract buyers and help them form new bases and better entry points.

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Disclaimer: Everything I share is for educational and informational purposes only, and it should not be considered financial advice. Read my full disclaimer here.

MarketSurge powers the charts in this video.

The S&P 500 and the Nasdaq 100 keep making new all-time highs on almost a weekly basis lately. The dips are shallow and don’t last long. Naturally, the price action in the indexes differs significantly from the action in momentum individual stocks, which are a lot more volatile. We saw it again last week, when stocks like PLTR and HOOD had 6-10% pullbacks while the indexes barely moved. The pullback in many momentum stocks earlier last week coincided with a rally in lagging sectors like homebuilders. This is not the first time we have seen such rotations. The month of July started in a similar manner. So far, the pullbacks in momentum stocks haven’t led to a substantial correction; they just offered better risk-to-reward entry points. Sector rotations and dip buying are among the two most prominent bull market characteristics.

We are at the beginning of a new earnings season. We should be talking about earnings surprises and unusual market reactions, but this is not what the market is really focused on. Two other elements seem to have a bigger impact on sentiment – tariffs and interest rates. 

The Fed is meeting again this week. The expectations are for no change of the current path – meaning rates stay the same and there’s a consideration for a cut later in the year. And yet, the Fed might surprise us. There has been a lot of political pressure lately for lower rates. Any hint of rate cuts from the Fed will likely lead to a rally in the more interest-rate-sensitive groups in the market, such as homebuilders and biotech companies.

You might think that tariffs don’t matter and have been priced in already, but this is not what we saw in the market reactions to trade deals. They lead to significant gaps – see Japanese stocks last week. Vietnam ETF, VNM, is up 20% since the announcement of a deal on July 2nd. We are likely to see more announcements next week as the next deadline, August 1st, is approaching.

Try my subscription service, which includes a Discord room and private X feed with options and stock ideas, emails with concise market commentary, real-time market education, the Momentum 40 list of market leaders, and much more. See what subscribers say about my educational service.

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Disclaimer: Everything I share is for educational and informational purposes only, and it should not be considered financial advice. Read my full disclaimer here.