The market feels like a split story right now, with the S&P just putting in its highest ever close on Friday and emerging pockets of real strength in equities while at the same time persistent inflation concerns and a poor jobs number hamper the economy. Following this strong price breakout, we're seeing some clear evidence that traders are selectively reaching for risk again, but it's fragmented.
April-May was a broad, clean trend and it was easier to be aggressive. June and July though were much different. Overbought chips and the AI growth/momentum trade unwound and flows into energy, utilities, materials, and real estate reflected defensive positioning. That is the least exciting environment for swing trading stocks.
* **Thematic strength**: Cloud and software carry the Nasdaq, having led for six to seven weeks now. Multiweek leadership in online retail, biotech, and aerospace. Early rotations from lagging to improving in drones, robotics, space economy, quantum, optics, gold and metals. Semis got washed out in July. Still lagging but improving, though it's not necessarily fireworks.
* **High beta**: Has flipped from lagging to improving. The spread between high beta and low volatility has decreased from -11.8 to -1.7. Selective pockets, not broad aggression like April-May. I am watching for this to flip, which will really improve the picture.
* **30Y bond yields**: Aggressively selling off, yields at highest levels since 2007. When you can get >5% risk-free, waiting gets expensive. Credit spreads remain ultra tight though. It's a condition to watch.
I got into NTAP on July 20 for cloud theme exposure and it's starting to look good, up around $30 since entry. We also see multiweek leadership in online retail, which is why I got into GCT and BABA. In the space economy, I found an early turn in TRMB in late July and in drones, I got into ONDS last week. I got into gold on Friday, having intended to open a trade in GDX at 83 but then chasing it higher as it gapped up. Probably not great, but I intend for it to be a medium term hold.
https://preview.redd.it/7ben9ea35dih1.png?width=810&format=png&auto=webp&s=b8d21e35fcb25e35235fdb5c14542b782fa18db6