It’s been a rough couple of weeks for stocks, seeing the S&P 500 (NYSEARCA:SPY) briefly break 2700 late last week.
And there is more weakness across U.S. equities as we begin the holiday shortened week.
But there are signs that a tradable bottom may be nearing… even if just for the short-term.
Overall, there are reasons to be optimistic about early July, for three distinct reasons:
1. Â Sentiment has begun to turn more negative
Polls like AAII, Investors intelligence which have all contracted of late. Additionally, we see the Total Put/call ratio spiked north of 1.2 last week which on a monthly close, represented the highest close for the Total Put/call ratio since 2011.
So investors seem to be fearing the worst with regards to possible Trade tension and the resulting implications.
2. Â The early part of the month for the last four months, has been bullish.
As well, from a cyclical standpoint, we’ve seen markets bottom out into end of month, while trade higher to peak mid-month. Until this changes, it’s thought to potentially happen again in July which would make this coming shortened holiday week positive, along with potentially the following.
3. Sectors like Transportation, Industrials, Materials and Technology are all down near initial support.
These sectors are also beginning to show evidence of trend exhaustion on this June decline.
Thus, while trends are certainly bearish over the last couple weeks, there’re a few things that support the idea of a bounce, based primarily on stabilization within this decline after sentiment has grown more negative and markets have reached early month positive seasonality ahead of a major US Holiday.
However…Â This will have to be watched carefully, as any break below last week’s lows in Technology ETFs and Stock indices would immediately paint a more negative picture for downside acceleration into mid-month, and rallies would be postponed.
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Twitter: Â @MarkNewtonCMT
Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
