Chart Advisor: July Is for the Bulls

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

Tuesday, 4th July, 2023

1/ July Is for the Bulls

2/ Fresh Relative Highs for Homebuilders

3/ Buyers Brace for a Breakout in USD/SGD

4/ GDX: Time to Buy the Dip?

Investopedia is partnering with All Star Charts on this newsletter, which both sells its research to investors, and may trade or hold positions in securities mentioned herein. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice.

1/ July Is for the Bulls

With the year’s first half in the books, the equity markets delve into a historically slow period for stocks.

Surprisingly, according to historical seasonal trends, July’s average gain has been 1.26% since 1950, making it the fourth-best month of the year.

This implies that seasonality could continue to act as a tailwind, at least during the current month. 

If you sell in May, you might want to come back and buy in July.

2/ Fresh Relative Highs for Homebuilders

When we dive beneath the surface looking for relative strength, home construction stocks stands out as an emerging leadership group.

These stocks are considered one of the most crucial groups in the U.S., as their performance reveals economic health and, more importantly, insight into the risk behavior of market participants.

Here’s the Home Construction ETF (ITB) reaching its highest level since 2007 relative to the S&P 500 (SPY):

As you can see above, it took roughly 15 years to break out of this monster rounding bottom formation and complete a structural trend reversal.

Seeing continued strength in the ITB/SPY ratio is a feather in the cap for bulls. And it supports the growing strength from the industrial sector and global equities outside the U.S.

3/ Buyers Brace for a Breakout in USD/SGD

First stop, Singapore! Steve Strazza and Sean McLaughlin are headed east on a whirlwind tour of Asia.

They’ll visit seven cities over the course of the next month, meeting traders and financial professionals from the tip of the Malay Peninsula all the way to Japan.

Some of us can’t physically travel with them, but we can live vicariously through their stories and videos, and, of course, our charts.

Check out the U.S. dollar/Singapore dollar pair:

It’s not a bad time for Strazza and McLaughlin to be in Singapore with greenbacks in their pockets.

Sure, USD/SGD remains well off its September 2022 highs. But it’s challenging the upper bounds of an eight-month range and could be poised to resolve higher.

If and when it does, we’ll be on high alert for broadening USD strength and potential headwinds for global risk assets.

4/ GDX: Time to Buy the Dip?

Precious metals and their related stocks remain a mess.

But could gold mining stocks be offering a potential buying opportunity after two months of relentless selling pressure?

It’s hard to say. Regardless, last week’s candle argues a bullish case for the Gold Miners ETF (GDX).

The long lower shadow or “umbrella line” immediately jumps out at us. 

Long shadows often signal potential reversals following strong directional moves. This candle, in particular, is called a “hammer” as bulls hammer out a bottom.

So far, it’s only a potential bottom. We must witness upside follow-through in the coming weeks to confirm the bullish interpretation.

But last week’s action leaves us asking: Is it time to buy the dip in GDX?

Originally posted 4th July 2023

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