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July 2024 – Summer Rally To Continue

Outlook: Sentiment remains overly bearish in the face of short and intermediate tops in yields, crude, inflation and the dollar. The bullish divergence that has sent risk higher over the past month will be further bolstered by the receding headwinds mentioned above. Biden essentially buried himself during last week’s presidential debate. With odds of a Trump presidency now at 62%, market participants will want to reposition for greater risk.

Equities: Low weekly volumes pose a bearish divergence on rising prices, however it would be fitting for a final leg up to occur before the next intermediate reaction in time for election volatility. Broad indices look good. A decisive breakout in IWM would add serious confidence in significantly higher highs for the year. Should this small cap basket struggle to gain more traction, my expectations for risk, broadly speaking, are not as rosy. Bullish.

Dollar: Despite steady gains since the early June low, risk markets do not seem pressured. Sideways or slow ambulation up or down is fine for risk. Neutral.

Yields: Will continue to roll over. Buy bonds on a break below 4.36% on the treasury yields. Bearish yields.

Commodities: Choppy action that has mirrored the dollar over the last few years is fine for risk. Neutral but with a cautious stance should prices not falter.

Crypto: Unsurprisingly the outsized gains to set up the halving event were followed by a significant and long retracement. I called for a top and was still fooled by duration and depth given the ETF hype. Neutral.

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NOVEMBER 3, 2024 OBSERVATIONS

As discussed in prior weeks, broad equity price action will remain choppy around the top until the election results are clear. The worst-case scenario would...