Market Commentary
Happy Summer!
The summer doll drums are here, and the choppy, sideways trading price action has been a source of frustration to both bulls and bears, longs and shorts. Including this analyst.
These pages will skip the traditional “sell in May and go away” seasonal platitudes in favor of teasing out a forward-looking signal from the price action.
The chop is not a total surprise.
Summer was flagged as a window of weakness back in the dark days of the start of the Hormuz energy shock.
August was flagged as the month when inflation and growth pressures emanating from the Hormuz shock would fully manifest themselves and get digested by the market.
Instead of index level volatility, the eye of the storm has been in market internals at the sector level, which have been experienced a violent rotation from the high-beta semiconductor momentum trade to other sectors.
MTUM is down -8.43% MTD for the month of July. Some of its bigger components are faring worse:
MU is down -18.28% MTD.
CAT is down -15.72% MTD
GEV is down -12.925% MTD.
Meanwhile, SMH, the semiconductor ETF, is down -12.831% MTD.
The salient summer question is this: is this the end of the unwind or does it have more to go?