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MarketSurge powers the charts in this video.

It is said that we should pay the most attention to seasonality when it doesn’t follow the expected path, because it would not be priced in. This is exactly what has been happening in August so far. Historically, US stocks lose ground in August and September in the second year after the Presidential elections. Not this time around; at least, not so far. There are enough other catalysts to change the projected trajectory. 

The Fed’s chairman hinted that they might be ready to begin rate cuts. The market loved the message. Small caps gained 4%. Crypto, homebuilders,  and China were also among the best performers. The US Dollar was the biggest loser.

In the meantime, we are in the midst of the biggest deregulation of the financial industry in decades, which allows banks to use more leverage and regular investors to have access to more asset classes. It is an environment primed for degenerate speculation.

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MarketSurge powers the charts in this video.

Bull markets correct through sector rotation. Last week, we saw proof of that. While megacaps consolidated near their all-time highs, small caps erupted. The catalyst – smaller than expected consumer inflation, which is likely to lead to a rate cut later in the year. The premise is that many small caps need to refinance, and any decline in interest rates could have a big impact on their bottom line. This is why biotech and homebuilders were among the big movers last week.

Later in the week, the so-called producers’ inflation came above estimates, which led to a pullback in small caps. The index is still in an uptrend, and as long as rates continue to decline, it should keep making higher highs and higher lows.

In the meantime, crypto lives in its own world and has its own catalysts. 401 (k) accounts are now allowed to invest in crypto and private companies. BTC, ETH, and SOL made new multi-year highs before they pulled back later in the week. I wouldn’t chase them here. I would rather wait for them to set up again near their rising 20 or 50dma.

August and September of the second year after the US presidential election are typically red months for the stock market. We have not seen any evidence of that yet. There are select industries like software and cybersecurity that had sizable pullbacks, but the indexes have remained unscathed for the most part due to sector rotation. The government seems bent on the idea of inflating the debt via currency depreciation, so any sizable dip in the stock market is likely to be welcomed as a buying opportunity. 

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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.

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