A look at July/August, with the crystal ball

Some records have been broken on $RTY and generally in small caps recently. 

1. Russell has reached the most overbought OB/OS reading in history vs any index ever. 

The move this week was apparently so unexpected that when it happened, everyone plunged their cash in. Cant say I didn't say so...but hey I was way early. 

2. $SPX500 and the general market has triggered a Whaley Breadth Thrust. 

This is not an innuendo, it's an actual thing. 

The Whaley Breadth Thrust indicator is triggered when the number of five-day advancing stocks in the market exceeds the number of five-day declining stocks by about 3-to-1. This happened on Wednesday. 

You can find what happens after this signal historically here :

But in short - don't short. 

This isn't a signal that happens every week.

It's an indication of a widening breadth in markets, or in other words a rotation from money markets - where 4T cash is sat on side-lines - to small caps and riskier value stock 

Albeit as @CrossdInvestment rightly points out - This cash on "side-lines" is there for a reason and not much of it will ever go into stocks. 

3. Another point for the bulls - SPY has gapped up 8 times consecutively with at least 4 new highs. 

This might sound like a random condition, but historically when this happens it marks a further thrust in market continuation. 

Find the backtest here : 

4. A point for the bears - if any are still alive - July tends to peak after July 16th each year. So yes you can enjoy a decline in the general market for a few days. The following month? Rebound. Obviously.

5. For the small cap bulls - a very simple and effective strategy has triggered a long term swing position to the upside after the recent rise. The backtest of this strategy? 

Average 17% upside from buy to sell from 1980 to 2024.

6. The ratio between $NSDQ100 and $RTY has hit dotcom levels. 

In fact it surpassed dot com levels by a decent 20% margin. Now there are many posts trying to compare the last bubble with the current market - I am sorry to say that a bubble is precisely a bubble because it marks a new era which creates a euphoria- therefore you cannot compare previous bubbles to current bubbles.

I remain on the side-lines on whether AI is one 

But there will always be some interesting charts to compare the dot com to now, just like you can plot the rate of murders to ice cream sales in the summer.

7. The % of stocks above their 50D average in SPX, NAS, RTY and all NYSE listed stocks is nearing 70%. 

Contrary to my last post - where RTY was at 35% and marked a bottom - the markets have significantly risen as a result of the small cap sudden rise this month and we are now at a probable level for a minor correction. 

( This was the case 3 days ago - prior to the $NSDQ100 "collapse" ) I would be a buyer at 30% regions once more.