July Strategy Session: 3 Key Takeaways

Alfonso Depablos, CMT
July 8, 2024

From the desk of Steve Strazza @Sstrazza

We held our July Monthly Strategy Session last week. Premium Members can access and rewatch it here.

Non-members can get a quick recap of the call simply by reading this post each month.

By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends. This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.

With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.

1. Bellwethers Lead The Way

In healthy bull markets, the blue-chips and bellwether stocks tend to lead the way, and that’s exactly what's been happening. 

Here’s our Bellwether Stock Index printing fresh all-time highs:

The bellwether stocks that have lagged such as Boeing and Alcoa, continue to play catch up to the leaders.

Amazon is just now breaking out to new all-time highs, while other market behemoths like JPMorgan Chase and Walmart reclaimed their prior cycle highs months ago. 

Long story short, it's all clicking in large-cap land.

If our Bellwether Stock Index holds this breakout, we want to continue leaning on these stock market leaders.

2. A Brief Intermission

While the Technology sector has been making new all-time highs, several other key sectors have traded sideways for most of the year.

Notably, the Industrial, Financial, Consumer Discretionary, and Healthcare sectors, which account for over 40% of the S&P 500, have made zero progress this year. 

This pause is well-deserved, given that these sectors all soared higher by over 20% from their October lows as we came into the year. 

We’re betting that this period of consolidation is temporary, and once it passes, these sectors will help push the S&P 500 higher. 

Remember, we always want to err in the direction of the underlying trend. And the trends that preceded these ranges were undeniably moving up and to the right.

3. Don't Forget About Energy

While market leaders flirt with new highs, the laggards remain above their support levels.

This is particularly true for crude oil as the price builds a base above a critical polarity zone at its former highs around $71-73.

The bulls want to see a breakout from this basing pattern. If and when we get it, energy stocks will likely benefit and experience a new leg higher.

Until then, energy futures and equities look to hold more opportunity cost than anything. Without some decisive resolutions from these ranges, we have to expect more sideways action.

Those are some of the main takeaways from this month’s strategy session.

Thanks for reading, and please let us know if you have any questions!

Allstarcharts Team

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