Are Bulls Entering the Strongest Two-Week Stretch of the Year?

Plus: A long-term Swing Setup in JPMorgan (JPM)

Author

Danny Riley
July 05, 2023

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Our View

There is a lot to cram in when there are only three full sessions in a five-day week. Additionally, most people that traveled over the 4th of July probably won't be returning until Monday and some will continue on even longer with their summer vacations. That’s particularly true after the robust six-month performance of the S&P 500 and Nasdaq, up 16% and 32%, respectively.

This will only add to the thinner volume conditions we tend to see in the summer (and potentially fuel the “thin to win” trade).

Yes the stats are bullish for the first part of July and yes I think higher prices are on the way, but the PitBull said he has seen highs in July made around July 6th. Further, sentiment is starting to get a bit frothy:

Seasonality matters, but it doesn’t create any guarantees.

“We are entering the best seasonal period of the year for US Equities. The first 15 days of July have been the best two-week trading period of the year since 1928. July 17th is when equities start to fade.

Since 1928, July 3rd has the highest hit rate for the S&P of positive returns (72.41%), followed by July 1st (72.06%), and other statistically significant trading days during the first two-weeks of July.

These stats are staggering for the NDX over the past 15 years. NDX has been positive for 15 straight July's, with the best days of the year July 1st (91.67%), July 2nd / 3rd (75%), and July 5th (77.78%). Returns are front loaded and early in Q3.”

Scott Rubner, a managing director at Goldman Sachs

Our Lean — Danny’s Trade

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MiM and Daily Recap

The ES opened Sunday night’s Globex session at 4485.50. After the open, the ES rallied up to 4491.75 and then pulled back to 4485 and then rallied up to a new high at 4493.25 and then sold off down to a new low at 4479.50 at 9:32 am. The ES traded in 5 to 7 point range until 11:02 and then popped up to a 4494 double top and settled at 4492, up 9.5 points or +0.21% on the day with total volume of 199,000 contracts traded.

Tuesday’s session — the 4th — was similar, opening at 4492 on Monday night, with support between 4486 and 4487 and resistance between 4493 and 4494. It ended the session at 4490.50.

In the end, the ES inched its way higher during the shortened sessions. In terms of the ES's overall tone, it was firm. In terms of the ES’s overall trade, the volume from July 3rd came in at just under 600,000 contracts, more than I would have expected.

Technical Edge

  • NYSE Breadth: 76% Upside Volume

  • Advance/Decline: 69% Advance

  • VIX: ~$14.50

SPY — Gap-Up Caution

Some weakness to start Wednesday, the question is whether the bulls gobble up the dip or if we see a bit further of a fade.

Keep an eye on this week’s low near $441. A break of that could usher in a test of the 10-day ema and the gap-fill at $438.28.

  • Upside Levels: $442.50, ~$444

  • Downside Levels: $441, ~$438

S&P 500 — ES Futures

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