Summary: US equities have gained every month since April, and are up over 3% so far in July. Our long term view remains that SPX will make a new all-time high in the months ahead. That is now just 2.5% away.
The short term is less clear. SPX has gained 3 weeks in a row; most often, these streaks are followed by a higher high without too much interim give back. Sentiment and volatility data mostly supports further gains.
But, while July is typically a strong month, that strength has often been realized by the end of last week. The rest of the month is usually flat, at best, and seasonality is typically a headwind in August and September. Right now, that tendency is further supported by weakening breadth momentum.
Earning data pushes to the forefront this week: 35% of the companies in the S&P will report their 2Q earnings in the next 5 days. The advanced estimate of 2Q GDP will be released Friday.
US equities rose for a third week in a row this week, although the gains were minor (from alphatrends.net) Enlarge any chart by clicking on it.
The set up at the end of June was for higher prices: "July is a seasonal tailwind, and several sentiment indicators suggest a bias higher (to the top of the range) is warranted." In the event, SPX has gained 3.1% and NDX 4.3% so far in July.
A three consecutive week gain in SPX is a good sign of momentum. Most often (more than 85% of the time), 3 week gains are followed by a higher high without too much interim give back. That doesn't necessarily mean a higher close this week, but a small loss would likely be followed by a higher close in the next 1-2 weeks (blue lines).
The overall trend remains higher. SPX is trading above all of its moving averages, which are trending higher. This is the definition of an uptrend. NDX made a new all-time high (ATH) on Tuesday and small caps made a new inter-day ATH on July 10.
SPX made its most recent ATH on Friday January 26. It has now traded up to levels from January 30-February 1 (yellow shading), which was resistance on the first attempt to surpass. Through targets the open gap from January 30 at 2839-53. On weakness, WS1 is 2788, which was also the mid-June high (top blue line). A good rule of thumb is that early weakness should be reversed by Wednesday morning, with SPX back above its WPP (2801). If that doesn't happen, a down week becomes more probable.
