Even the Bulls Wouldn't Have Predicted This

The market slowed down a little on Friday, but it was a big week of gains with the best action of the year. The S&P 500 and Nasdaq 100 QQQ are up seven straight sessions and have cut through significant technical resistance without a pause. Breadth was around two to one positive, and around 480 names hit new 12-month highs.

Housing data on Friday morning were a little weaker than expected but not enough to cause any new worries about the economy. Two weeks ago, market players panicked about economic slowing, but they have now embraced a Goldilocks narrative in which inflation is not too hot and economic growth is not too cold. It is a near certainty that the Fed will cut rates by at least 0.25% in September.

The action became a little frothy this week, but when there is this much strength, it doesn’t suddenly evaporate. There was some technical consolidation Friday, but the dip buyers who missed out are not going to let stocks come in very much.

Next week is a quiet news week with little economic news other than the Fed minutes. There are also some earnings reports, mainly in the retail sector, that will garner attention, but it is prime vacation time on Wall Street, and there won’t be many catalysts.

The big question is whether the bulls can keep this trend running. They are currently fueled by the Goldilocks narrative, but things are getting overbought, and technical conditions make it tough to chase new purchases. I have found a few charts I like, but there isn’t much of a selection until there is some consolidation.

At some point, I expect to see negative seasonality come into play, but bears that were expecting technical resistance to matter have been crushed. Even the bulls have been surprised at this level of strength, but the high level of complacency is a concern.

Have a good weekend. I’ll see you on Monday.

At the time of publication, Rev Shark had no positions in any securities mentioned.