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6/29/22 China’s New COVID Policy, Your July Outlook

News:

Markets opened higher yesterday, but that’s where the good news ends…

After the open markets steadily declined throughout the day. At the close, the Nasdaq was down 3%, and the Dow Jones fell 1.6%.

The Consumer Discretionary sector led the way lower as the worst-performing sector.

It was dragged down by Amazon (AMZN), which fell 5% after a UBS analyst cut his price target by 20%.

Energy was the only sector to finish in positive territory,

While there was no clear catalyst for the broader selloff, China’s COVID announcements spurred the gains in the energy… 


Photo by Anna Shvets from Pexels

Shanghai declared victory over the latest COVID wave with “no new locally transmitted cases” for two days. Today the city’s begun loosening restrictions “gradually.”

On the national stage, China’s National Health Commission cut quarantine times for inbound travelers in half. It was 14 days … now it’s 7. 

This is Mainland China’s first easing of border restrictions since the pandemic began.

Technicals:

As you can see on today’s chart, yesterday’s selloff was in-line with the bearish trend that has gripped the markets for months.


SPY Daily Candles – Chart via thinkorswim

RSI levels are neutral this morning…

The VIX looks pretty much the same as yesterday.

But the put-to-call ratio returned to oversold conditions. So far, betting against rallies in 2022 has paid as well as betting on rallies in 2020 and 2021.

Timing:

Your July Outlook:

  • The Dow Jones averages a gain of 1.3% for the month, even in midterm years
  • It’s traditionally the 4th best month for the S&P 500 and Dow Jones indexes

July in midterm years has a poor history for the riskier stocks…

  • The Nasdaq averages a decline of 1.9% in midterm years
  • The Russell 2000 does even worse, averaging a loss of 3.8% during midterm years

Notable events on the calendar…

  • July 6, June’s FOMC meeting minutes released
  • July 8, unemployment rate and report
  • July 13, CPI inflation reading
  • July 15, Univ of Mich Consumer Sentiment report
  • July 26 & 27, FOMC meeting & likely a new rate hike

Watchlist:

*Low Float
^Open Position


*FNKO has support at $22
*HMTV has resistance at $8
^CBIO has support at $1.50, resistance at $1.60
CHEF has support at $38
ALT is on watch
KDNY has support at $18
JKS has resistance at $68, support at $65
OPTN has support at $3.25, resistance at $3.80
CYTK has support at $45
BORR is on watch
LI is on watch
SGEN has support at $175, resistance at $180

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