August has started out with incredible strength as market reached new highs. Now as we enter a highly volatile time of year it will be key to look at the proper time frames for any thesis. Its easy to lose sight of potential upside and downside when investors and traders get tunnel vision as they watch price go against them and then they lose sight of the bigger picture on longer time frames. I think this is especially key for the rest of Q3 where it has been one of the strongest quarters of the year already for my own strategies.
This was the portfolio build released for July and while some names have been added and others profit taken, the performance has done well. The August portfolio build will be shared later on in this report.
Seasonality Roadmaps
VIX - Watch for volatility to rise after the 1st Half of August
IWM - Small caps often start to stall out in the 2nd half of August and bottom in early October. The Russell 2000 is the highest-beta expression of the presidential cycle. Its midterm-year drawdown is the deepest of the four and its pre-election-year advance is the largest. The clean way to trade the cycle in small caps has historically been the midterm-October to pre-election-July window.
SPX - bigger picture, we are getting closer and closer to what has often been an ideal buy zone of the cycle. Average returns from November to end of April is >18%
Gold RUSH
The window of strength in August was expected and should the dollar continue to roll over it can give Gold a further boost into the fall season. Here is some nice data points from Tom McClellan highlighting where weakness could continue for the dollar.
“Commercial traders of Dollar Index futures responded this week (COT Report data) by actually upping their collective net short position. If you look back at other price tops in this chart, you may notice that when the commercials do this, adding shorts after the downturn, it means that there is a lot more downturn yet to come for the DXY.”
Longer term Gold has a very strong fundamental case for further upside but short term want to see how it acts around that August 19-20th timeframe and might be a good spot to take some additional profit or hedge.
Watch for a gap fill and a reaction near the 200D (red line)
Market Outlook and Portfolio for August
I’ll start by summing up my general view here. I believe we see a brief pullback soon before higher and expect the market holds up pretty well in August.
But, a quick correction in September / October I think is likely, there are some key factors that could derail this even quicker that we will review. A few topics this section will focus on
What path does oil take, the bearish or bullish seasonal trend
Software Sector Hitting some Key Levels
Nvdia and SOXX Analysis
Index Targets for August and September (SPY,QQQ,IWM)
August Portfolio
