NASDAQ Pullback and Seasonal Patterns

July 21, 2024 Update

The Nasdaq closed at -3.65% for the week driven by a strong correction in Tech, especially in semiconductors. On the weekly, the NASDAQ remains above all moving averages and it looks like a normal pullback in the context of an uptrend. To be noticed the ugly closing bar though, as we closed at the low of the bar with no signs of buyers at the close.

NASDAQ WEEKLY CHART

NASDAQ DAILY CHART

On the daily is more apparent the strong and quick reversal with the 10 and 21 days moving averages heading down. A chart that looks ugly too. At least, the volume was getting lighter on Friday.

SEASONAL PATTERNS

Below is a chart showing average patterns of the SP500 during election years. We are around where the red bar is and we are right into this late July seasonal correction. If we follow the path, the correction should end soon before moving higher through mid-September, then sideways till elections before an end-of-the-year rally.

Do I believe we’ll follow such a path? No, it is just a reference chart that can help have a benchmark for this election year.

MACRO ENVIRONMENT

Right now the backdrop remains positive for stocks unless really bad economic data starts to show up.

The early estimates for Q3-2024 GDP growth are moving higher to 2.7%:

The inflation Nowcast for July 2024 is sitting at 3.01%, Oil prices are at around $82 and trending down, while there are no stress signs from the credit markets.

If the economy does not collapse and rates start to come down as expected from next September, the Bull market should continue, net from normal short corrections. This is my base case.

MOMENTUM PORTFOLIOS

In my Large Cap pot, I was stopped out from GRAB 0.00%↑ for a 9% loss. Meanwhile, my RKLB 0.00%↑ order was triggered.

ZETA 0.00%↑ is the best-performing stock from my open positions and I like its chart.

I updated all my Stop Loss levels to minimize the risk of a correction of the market getting nastier.

In my Small Cap pot, I was stopped out from CLS 0.00%↑ for a 4.7% gain. All other positions look good right now. I updated my Stop Loss levels nonetheless.

As mentioned in the past, I will close the small-cap momentum pot as soon as I exit all my open positions. Then I’ll manage just one momentum portfolio where I expect to have 70% invested in companies with a minimum market cap of 8BN and 30% on companies below 8BN, for a maximum of 7 positions in total.

I am also working on a new Long Term Portfolio, where I expect to have up to 12-15 positions and keep them for months or years, within a set of rules to protect my capital.

WATCHLIST
Below are my favorite charts from my stock universe:

That’s all for the week! Let’s see what the market will bring us.

-

Important: This is not investment advice. Consult a licensed financial advisor before making any investment decision.