Epilogue – 7/13/2021

This will be my last update and commentary until Sunday, as I will be traveling for the next few days. 

Using a 5-minute RTH chart and just like Monday, our S&P 500 index market proxy started with a weak bull trend from the open on weak internals.  After some consecutive complex tops and four pushes, we saw a mid-day reversal down into the top of the single prints identified yesterday morning around 4362. The 21-day line shifted from support to resistance for the rest of the session.

We saw a long trade from a Navigator Algo trigger buy signal near the open and another on the breach and retreat from the 30-minute opening range. Like Monday, the target was double the range where the price then reversed. The reversal generated one good, clean short trade which ended in a final flag. The rest of the day was sloppy and choppy.

Our XLF trade made a nice turn on support at the 5-day EMA but could not make much further progress after lunch. Nevertheless, it held its ground in the wake of solid results reported by Chase and Bank of America. There is always some profit-taking on the earnings reports. The XLF is poised to take advantage of some more pressure on interest rates in the wake of the third upside surprise in the monthly inflation data.

As I have been counseling, the probabilities are that July will close below the open of the month since we have six consecutive monthly bull market candles on the chart. It is highly unusual to have that many uninterrupted, positive months.

The market is likely to evolve into a trading range, and Tuesday’s action underscored that narrative. We will continue to use a close below the 5-day line on the XLF as our stop line. The XLF is poised to do well, but there is a risk it could get caught up in a market correction if the broad market decides to take a tumble later this month.

We will dig deeper into all of this on Sunday.

A.F. Thornton