The Waiting Game

Hello Friends! I hope this note finds you well.

The first thing that stands out in preparation for the week ahead is the lack of earnings. We’re talking maybe a quarter of the number of companies that reported last week.

You can say the summer lull starts now as many are playing the waiting game.

We’re all talking about that seasonally weak period through September.

On the positive side - while everyone is talking about that - no one is talking about the recent extreme low in nasdaq breadth momentum. The last two times those levels were reached - it was the bottom for months.

And sure December was close, but still as far as one can tell many are focused on the risk. So game theory wise, picking our spots still make sense even if the backdrop is challenged

Even small caps held where they had to last week.

But back to the bearish side - the premium for buying the dip in a fearful tape has been used up. Of course this does not have to revert any time soon.

And if we smooth out that breadth momentum measure, it’s still declining and flashing sell.