2nd Half Looks Much Different

JC Parets
August 11, 2023

We're almost half way through the 3rd quarter already!

Boy does time fly when you're having fun.

Have you noticed how much different the 2nd half of the year looks compared to the first half?

We're thrilled to see it.

Owning Tech stocks stuck below overhead supply is no way to go through life.

Here is the Market-cap Weighted Technology Index failing miserably to break out above its former cycle peak.

And, of course, the Equally-weighted Technology Index failing altogether to even retest its former highs:

Some people don't think that the $XLK is a good representation of the Tech sector because almost half of it is just Apple and Microsoft.

But when you compare the two, they look exactly the same, except the Equally-weighted version is slightly worse.

The catalyst to prevent stock prices from advancing continues to be the US Dollar.

Again, if the US Dollar Index is above the 1st Half lows, then stocks are going to keep having a hard time:

The most bullish thing for stocks right now would be a complete US Dollar rollover.

The negative correlation between the US Dollar and stocks remains strong. Although I think this is the lower probability outcome, I believe this is what it will take for stocks to pick up the pace again into the end of the year.

Again, to be clear, a Dollar rollover and fresh breakout in stocks is not something we want to bet on, at least not for the foreseeable future.

They still have a lot of work to do, and I'm not going to sit around waiting for it.

There are plenty of opportunities underneath the surface in stocks and sectors with much lower weightings in the major averages.

We could easily find ourselves in a situation around the holidays where the major indexes still have not been able to make much progress, yet there are HUGE winners at the individual stock level, and probably even at the sector level.

So when they say, "It's a market of stocks", this is what they're talking about. You might even be able to argue that it's a market of sectors.

This is still NOT the type of market environment to own the averages.

Make sure to check out last week's LIVE Conference Call for all the details on what we're buying and what we're selling.

Give it a watch and let me know what you think!

JC

 

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