Market commentary from Muffett investments: S&P500

We are presenting the daily chart of the S&P 500 and the price has been in a range since May but unlike the Nasdaq, the price has showed relative strength and is still within the range. The price is currently in a support zone and if that support breaks then the next target is the liquidity below. This in our view is bullish and as we have pointed out in the Nasdaq analysis, the divergence between Nasdaq and S&P 500 still persists. Trump’s incentive still persists and so we maintain a bullish view on the stockmarket. Most of the weakness in the stocks have been in the technology sector which are correcting following an incredible rally.

This is the divergence we had talked about in previous analysis. But it is important to remember that the divergence needs to be confirmed by price action. That would mean the price rallying form the support zone and close above the most recent daily swing high. This would be a close above 7530. we have some heavy weights reporting earnings and hopefully those provide the boost to take the index higher.

We have the S&P 500 sectors performance relative to each other. we have deliberately left out XLE which is the energy ETF. Our belief is that all portfolios should have energy exposure but we buy energy when it is cheap and not when the prices are near $100. The S&P 500 is being supported by XLF and XLI mainly. The XLF is the financial sector and they are performing very well because the raised rates environment. On this basis, we have increased our allocation to the financial sector. we bought Blackrock, Visa and Morgan stanley.

Let’s now look at the sectors that we were interested in the beginning of June. We liked XLB, IGV and XLV. We liked the XLV most because of the defensive characteristics of the components. However not all of our ideas have paid off. With regards to XLB, we were focussed on the Gold and Copper miners. These have not performed well. But we think that they will start to perform well soon after a multimonth consolidation. IGV also has not performed well although some of the stocks on the IGV are the best performing stocks in the last 1 month. Unfortunately we do not hold them and i do not think that they provide value at these levels. We still like servicenow and salesforce. We sold our position in Atlassian in the strategic portfolio.

We also liked the MAG7 stocks. But again most havenot perfromed well. But we are still positive on Microsoft, Amazon and Google. Apple has been the outperformer as they have not spent any on the AI infrastructure buildout. Although currently they are on top, their business model will be disrupted by Xiaomi in the future. This is our prediction which is one of the reasons why we do not hold Apple.

These are the healthcare stocks that we like and we have researched in the past. ALso on top of this the one we like most is Boston Scientific. The algorithms wont like this stock as they are significantly underperforming the major indices and XLV. But this does not mean that they are a bad company. They are quality and exposed to ageing megatrend. We just need to wait. They will also. report on wednesday 29th July. So i guess that it is an important day for. us.

All analysis done in good faith and not investment advice.