7/28/23 The Summer Rally is Over (Probably)


The advance estimate for Q2 GDP came in hotter than expected. 

America’s economy grew at an annualized rate of +2.4%. The average forecast was +2.0%.

Chart by the NYT

The chances of a recession just got slimmer. And initially, the market rallied, the S&P 500 gained nearly 1% at the open on Thursday.

But there was no follow-up … markets faded throughout the day. By the close, all major indexes were solidly red…

  • Dow Jones -0.7%
  • Nasdaq -0.6% 
  • S&P 500 -0.6%
  • Russell 2000 -1.3%

The selloff relieved the market of all oversold conditions. We’ve been expecting this drawdown all week.

Sector Round Up

10 of 11 sectors ended Thursday’s session in the red.

The lone winner…

  • Communications (XLC) +0.8% – More on that below

At the bottom…

  • Financials (XLF) -1.3%
  • Utilities (XLU) -1.8%
  • Real Estate (XLRE) -2.1%

Zuck Back on Top

Meta Platforms (META) was responsible for holding up the communications sector.

Image from MarTech
  • The company smashed expectations on its most recent earnings report
  • Yesterday’s 4% rally has the stock up over 250% since last year’s lows
  • Artificial intelligence (AI) is driving higher engagement and ad sales
  • META’s current market cap is about $800 billion


Yesterday’s selloff was long overdue.

SPY Daily Candles w/10-day RSI – Chart by thinkorswim

The losses relieved overbought conditions but also completed a bearish engulfing pattern.

Our take—The summer rally is likely over.

Your latest readout…


This morning at 8:30, the latest inflation reading will drop in the form of the Personal Consumption Expenditures Price Index, aka PCE.

It’s worth noting these levels at it is The Fed’s preferred measure of inflation.

Just 2 trading days remain in July. Your August outlook will be delivered on Monday.


*Low Float
^Open Position

*BTM support at $3.80
*ULBI on watch
AMSC support at $8
EYPT support at $10
^OSTK support at $32.75
APLD support at $10, resistance at $11
WW support at $10
QSI support at $3

Secondary watchlist—float 100+ million

CAVA support at $48
TALK support at $1.40
MKFG resistance at $2
XPEV on watch

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