The final week of the second quarter has commenced with the S&P 500 hovering just below its all-time highs, despite minor fluctuations in some prominent technology stocks, notably Nvidia. This period typically sees positive seasonal trends favoring equities, a sentiment reinforced by historical data highlighted by Jonathan Krinsky, technical strategist at BTIG. He points out that the Invesco QQQ Trust Series I, tracking the Nasdaq 100, has recorded gains in each of the past 16 Julys, averaging a notable 4.62% increase over this period.
Moreover, the Nasdaq-100 has been on an unprecedented streak, going 379 consecutive days without experiencing a daily decline of 2.5% or more—a historical milestone that underscores current market resilience. However, Krinsky warns of potential volatility ahead, citing past instances where similar streaks ended abruptly, resulting in significant market corrections of 16% and 18%.
Jefferies analysts echo cautious optimism, noting that the S&P 500 has enjoyed a higher proportion of positive trading days—56% versus a historical average of 52%—so far this year. This upbeat sentiment has been further supported by a relatively low VIX (Volatility Index), which measures market volatility and remains subdued. Nonetheless, Jefferies acknowledges growing unease among investors regarding the sustainability of such exuberance.
The 14-day Relative Strength Index (RSI), another closely watched technical indicator, has also been signaling overbought conditions for the S&P 500. Despite short-term concerns that an RSI above 70 could precede a market downturn, Jefferies’ analysis of historical data since 1990 reveals that such periods have typically been followed by robust long-term performance. Over the subsequent 12 months, the S&P 500 has historically averaged a 12% gain and registered positive returns 88% of the time, suggesting that prolonged overbought conditions may not necessarily translate into imminent market corrections.
As U.S. stock-index futures exhibit a mixed opening, benchmark Treasury yields remain stable. The dollar index has softened slightly, while oil prices continue to rise and gold maintains its position around $2,325 per ounce. Market attention this week will focus on key events such as Federal Reserve official speeches and the release of the Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred measure of inflation, on Friday.
In corporate news, Apple is under scrutiny as the European Commission preliminarily concludes that its App Store rules may violate EU competition laws. Meanwhile, Enerpac Tool Group is set to announce its earnings after today’s market close. Cryptocurrency-related stocks like Coinbase Global and MicroStrategy have seen declines amid bitcoin’s recent price movements.
Overall, while optimism persists in the stock market fueled by seasonal trends and strong historical performance indicators, investors remain vigilant amidst potential signals of market overheating, emphasizing the need for careful monitoring of upcoming economic data and corporate developments.