After a quiet trading session on Monday, the S&P 500 started another price rally on Tuesday, which lasted until the end of the week. After the markets remained closed on Thursday, July 4, due to the national holiday, the focus was on labor market data on Friday. At 206,000, the number of new non-farm payrolls was slightly below the previous month's figure. However, only 191,000 new jobs were expected and the data was therefore somewhat more robust than anticipated. The unemployment rate, which was also released on Friday at 2.30pm, came in at 4.1 %. The expectation was 4.0 %, as was the previous month's figure. All in all, the figures were interpreted positively by the market. The labor market continues to cool moderately and the probability of a first interest rate cut by the Fed in September is increasing. According to the Fed Watch Tool, the current probability of a rate cut of at least 25 basis points on September 18 is 77.9 %. Just a week earlier, the probability was 64.1 % and a month ago the probability was 50.5 %. In addition to the price gains on the equity markets, yields on US government bonds also fell on Friday.<\/p>\n\n\n\n
<\/a>Sector rotation signals willingness to take risks<\/h2>\n\n\n\nA look at the performance of the individual market sectors of the S&P 500 shows that the offensive sectors have taken the lead again and the defensive sectors are showing relative weakness. This signals an increasing risk appetite among investors and is a positive sign for the long-term bull market. The chart below shows that the three most offensive sectors have performed the best of all market sectors over the past 20 days:<\/p>\n\n\n\n
\n- Consumer Discretionary (XLY): +6.33 %<\/li>\n\n\n\n
- Communication Services (XLC): +3.55 %<\/li>\n\n\n\n
- Technology (XLK): +8.44 %<\/li>\n<\/ul>\n\n\n\n
The defensive sectors Utilities (XLU) and Consumer Staples (XLP) even recorded slight price declines, as did the Healthcare sector (XLV). The sector rotation could not be any clearer.<\/p>\n\n\n\n![\"\"](\"https:\/\/www.captrader.com\/wp-content\/uploads\/2024\/07\/word-image-52179-1.png\")
<\/figure>\n\n\n\nPerformance of the individual market sectors of the S&P 500 over the last 20 days<\/p>\n\n\n\n
<\/a>Market breadth recovers slowly<\/h2>\n\n\n\nFrom a market breadth perspective, the signals are not yet entirely clear. The Advance-Decline-Line has risen moderately in the last two to three weeks after signaling some weakness in the previous weeks. The A\/D line has not yet generated any new highs and the divergence with the performance of the S&P 500 Index has not yet been fully resolved. However, it is a positive signal that the A\/D line is rising again and can continue its upward trend. The number of stocks that have made new 52-week highs has also risen again in the last two weeks and is significantly higher than the number of stocks with new 52-week lows. However, the rally continues to be led to a large extent by stocks with a high market capitalization and index weighting. The S&P 500 Equal Weighted Index has barely budged in the last three weeks.<\/p>\n\n\n\n
<\/a>Seasonal tailwind for the short term<\/h2>\n\n\n\nIt is well known that the stock markets are often somewhat quieter during the summer months. Historically, July, August and September are the weakest months for the S&P 500. In the last 50 years, the S&P 500 has only risen in July just over 50 % of the time. August and September are also among the weakest months historically. In September, the index only rose 42 % of the time.<\/p>\n\n\n\n![\"\"](\"https:\/\/www.captrader.com\/wp-content\/uploads\/2024\/07\/word-image-52179-2.png\")
<\/figure>\n\n\n\nIn the last 20-30 years, however, the seasonality has shifted somewhat and July is often still characterized by seasonal strength, especially in the first two weeks.<\/p>\n\n\n\n![\"\"](\"https:\/\/www.captrader.com\/wp-content\/uploads\/2024\/07\/word-image-52179-3.png\")
<\/figure>\n\n\n\nSeasonal trend of the S&P 500 Index over the last 20 years (Detrended)<\/p>\n\n\n\n
If a correction becomes apparent in the coming weeks, it would therefore not be a bad idea to wait and see in August and September and try to \"play\" the seasonal long trade again towards the end of September to the beginning of October.<\/p>\n\n\n\n
The defensive sectors Utilities (XLU) and Consumer Staples (XLP) even recorded slight price declines, as did the Healthcare sector (XLV). The sector rotation could not be any clearer.<\/p>\n\n\n\n Performance of the individual market sectors of the S&P 500 over the last 20 days<\/p>\n\n\n\n From a market breadth perspective, the signals are not yet entirely clear. The Advance-Decline-Line has risen moderately in the last two to three weeks after signaling some weakness in the previous weeks. The A\/D line has not yet generated any new highs and the divergence with the performance of the S&P 500 Index has not yet been fully resolved. However, it is a positive signal that the A\/D line is rising again and can continue its upward trend. The number of stocks that have made new 52-week highs has also risen again in the last two weeks and is significantly higher than the number of stocks with new 52-week lows. However, the rally continues to be led to a large extent by stocks with a high market capitalization and index weighting. The S&P 500 Equal Weighted Index has barely budged in the last three weeks.<\/p>\n\n\n\n It is well known that the stock markets are often somewhat quieter during the summer months. Historically, July, August and September are the weakest months for the S&P 500. In the last 50 years, the S&P 500 has only risen in July just over 50 % of the time. August and September are also among the weakest months historically. In September, the index only rose 42 % of the time.<\/p>\n\n\n\n In the last 20-30 years, however, the seasonality has shifted somewhat and July is often still characterized by seasonal strength, especially in the first two weeks.<\/p>\n\n\n\n Seasonal trend of the S&P 500 Index over the last 20 years (Detrended)<\/p>\n\n\n\n If a correction becomes apparent in the coming weeks, it would therefore not be a bad idea to wait and see in August and September and try to \"play\" the seasonal long trade again towards the end of September to the beginning of October.<\/p>\n\n\n\n<\/figure>\n\n\n\n<\/a>Market breadth recovers slowly<\/h2>\n\n\n\n
<\/a>Seasonal tailwind for the short term<\/h2>\n\n\n\n
<\/figure>\n\n\n\n<\/figure>\n\n\n\n