Technically Speaking – July

July 5, 2023

Technically Speaking:

Long Term Resistance:  SP500 4500 then 4600

Long Term support:  SP500 3800 then 3500

The “magnificent 7” (AAPL, MSFT, AMZN, TSLA, GOOG, NVDA, META) continued to be the main market movers this year, and that held true through the end of the 2nd quarter. The S&P 500 finished the second quarter at 4450, managing to breakthrough the first long-term resistance at 4300 and the August high at 4325. We are still seeing a long-term support level of 3800 in the S&P 500. If the markets drop below the 3800 level, we see the next long-term support level at 3500. A couple of factors were behind this, markets tend to rally into the end of the quarter and into a holiday weekend and the fear of missing out. Many investors appear to be fearful of missing out on the rally in these big tech stocks. We also saw a revision in our first quarter GDP. The initial report estimated a 1.3% growth during the first quarter but was revised to a 2% final estimate. This change was caused due to stronger than expected consumer expenditures and strong exports during the 1st quarter.

Even with the rally into the end of the 2nd quarter, we remain cautious. The Fed is still planning on more interest rate hikes and this rally does not feel sustainable as it is being led by just a handful of technology stocks.  These stocks are volatile and can drop as fast as they rise.  We are looking to take profits in some of these stocks that have recently increased significantly and will wait for a better opportunity. We continue to keep our hedges on as we watch what the Fed does in the next few months.  Valuations are extremely extended, and the market is due for a pullback.