Bulls mounted a vigorous attack on Friday, yet they were ultimately overwhelmed by a wave of late selling, states Jon Markman, editor of Strategic Advantage.

The Nasdaq 100 index closed at 15,037, a loss of 0.4%. It was a bitter pill for bulls because they were so close midday Friday knocking out bears.

The entire bearish narrative now depends on the idea that the Federal Reserve will continue to raise interest rates, killing the economy and smashing corporate profits. It is a crazy idea. If the Fed proceeds to embrace and execute this idea, it will create a banking crisis, as savings are diverted from deposits to higher-yielding money market funds.

That would be a giant unforced error by a governing body tasked with maintaining stability in the banking sector. The central bank would be committing to its own goal.

Bulls have been betting since October 2022 that the Fed is nearer the end of its rate hike cycle than the beginning of a new normal of continuous increases. In fairness, this has been a shared assessment until Wednesday when the ADP report of private payrolls showed a surprise increase of 497,000 jobs.

Although the Fed will surely raise rates again on July 25 at the next Federal Open Market Committee meeting, it is going to be tough for bears to convince traders that many more increases will ensue. Inflation is moderating, and the risk of a banking crisis increases with each hike.

The weakness on Friday amounted to bulls falling back a bit to consolidate its 2023 gains. A test for the Nasdaq 100 of its rising 20-day moving average at 14,880 now seems likely. The Bulls should buy that pullback. 

Overhead resistance is 15,255, then 16,573, the November 2021 record close.

The NDX Loop: Members bought ProShares Ultra QQQ (QLD)—a 2x leveraged ETF that tracks the Nasdaq 100—at $63.00 on Wednesday, June 28. It is now $63.18. Now set up to sell half the position at $70.59 lmt gtc, and half at $75.70 lmt gtc. Set stop at 59.34 stp.

Stat Sheet: Breadth favored advancers seven-three. There were 105 new highs vs 85 new lows.

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Again, kind of a weird leadership group: hotels, transportation, oilfield services, and aircraft construction. Pretty random, though I do like Howmet, which is similar to our old favorite TransDigm (TDG).

No “Notes on My Scorecard” today as markets have been static and tired, not leaving too much to discuss. It should return next weekend. From a seasonal perspective, this lethargy is typical of the first half of July. Hope you are enjoying summer so far.

Learn more about Jon Markman here...