How I'm Trading July.
Anyone can analyze the market. Few are willing to make a call
I’ve been thinking a lot lately.
Not just about the markets, but about what actually constitutes a worthwhile addition to your weekly diet of technical, macro and market analysis.
If you’re anything like me, you probably spend a good chunk of your week scrolling through setups, relative strength charts and the latest hot takes from your favourite finfluencers.
But the longer I trade, the more I realise how little of it is genuinely useful.
Take this morning, for example.
I sat through a 40-minute video on market internals. The analysis itself was solid, but by the time it finished, I couldn’t help feeling a little short-changed. Not because the information lacked value, but because after 40 minutes of talking, the host offered a grand total of zero actionable ideas.
No tradable setups. No framework for putting the data into context. Not even a view on how it might shape the opportunities heading into a new trading month.
Is that really how we're generating alpha these days? By staring at the windsock, declaring the breeze to be easterly, then calling it a day?
Or should we be putting our balls on the line and offering a hypothesis about what that might actually mean over the coming days and weeks?
Or should we be putting our balls on the line and offering a hypothesis about what today’s evidence might mean for the days and weeks ahead?
With that in mind, this week’s newsletter takes a slightly different approach.
Rather than throwing another deluge of charts and trade setups your way, I’m going to do something far more useful: put my neck on the line.
Below are the themes I expect to define the next few weeks, the evidence supporting them, and the areas of the market I think are most likely to benefit if I’m right.
Swimmers off. Balls out. Let’s dive in.
A Different Kind of Bull?
You’ve probably read all the explanations as to why MU and AMD ran so hot throughout Q2. AI demand, earnings upgrades, and secular growth trumping macro headwinds, not to mention bottlenecks, bottlenecks and more bottlenecks.
It’s been a generational run for momentum (MTUM) since the April lows, but with a new quarter comes new opportunities.
In my view, MTUM is threatening to put in a top here, with a death cross on the 10/20dema looking likely barring a big reversal next week. Add to this the bearish divergence that’s been building between price, RSI and the MACD, and the setup looks ready to punish late longs.
Lastly, there’s this ‘lil nugget by Warren Pies.
Sure, this all might sound a little scary, especially if you’re trading MU with 10x leverage. But for those of you who, like me, currently find yourself sniffing around for opportunities outside of the names that crushed Q2, there are plenty of reasons to remain optimistic.
Hawkishness, What Hawkishness?
As discussed last week, the market has continued to shrug off rate hike fears - a thesis which now appears to be slowly making its way into the mainstream.
Whereas last week Kalshi was assigning an 81% probability of rate hikes before 2028 and a 65% chance of a hike arriving as early as July next year, those numbers have since cooled to 73% and 58% respectively - a drop likely attributable to this week’s weaker than expected NFP print.
Are we out of the woods completely? No. But that’s not a bad thing as far as I’m concerned. Give me more talk of rate hikes to fade and that wall of worry to climb!
Should this easing of hawkish rhetoric continue throughout Q3 - I see little evidence of the time of writing as to why it shouldn’t - then I’m looking at crypto-proxies, high beta, homebuilders and retail as potential benefactors.
One chart that ticks two of these boxes? Coinbase.
At the time of writing COIN is holding above its Q2 lows, a major support zone ~$140 and the AVWAP from the company’s IPO. Should price hold these levels and trend higher, I’ll be looking for a favorable entry for a short-mid term swing.
XLY has my attention too.
Having traded in a broad range and lagging the broader index on a relative basis throughout Q2, I can see why so many traders aren’t interested in discretionary stocks right now.
But if this breaks out, driven by the potential tailwind that potentially comes with a more dovish-leaning FOMC, then TSLA and AMZN probably deserve your attention.
From Failed Moves…
One of my favourite setups is when the market narrative and price action drift apart. Failed breakouts and breakdowns are the obvious examples, but they're really just symptoms of a broader theme: when the crowd says one thing and the tape says another. Double bubble!
XLC is top of my watchlist for a failed breakdown. If this thing holds and the MACD continues to support the pop above the Q2 lows, then META, GOOG and NFLX come into play as potential longs.
As far as failed breakouts are concerned…
As I rightly predicted a few weeks ago, financials were among the standout performers in the latter half of Q2.
But with everyone and their dog now pitching XLF and KRE as the hottest tickets outside Marbella, I’m becoming a little more cautious. Cautious - not bearish.
If the sector spends the next few weeks or months digesting those gains, I’ll happily revisit it. Until then, I think there are better opportunities for my cash elsewhere.
What About the Index?
Given the weightings of the MAG7 (roughly 35% of SPY and over 40% of QQQ), if you’re looking to trade the indices, ‘monitoring the situation’ on MAGS isn’t the worst idea.
When stocks that account for such a large share of both SPY and QQQ take a breather, it’s difficult for the indices to make meaningful progress - even if plenty of stocks beneath the surface are quietly getting on with the job. That’s just pure, unadulterated math at work, folks.
But despite all the talk of MAGS lagging the broader market of late, until we see a decisive break below the 200-day moving average cloud and the AVWAP from the April 2025 lows, there’s not much to fear here in my view.
In fact, if much of what I’ve outlined in this report plays out, there’s a reasonable chance the MAG7 end up as one of the main benefactors in Q3.
What do we need to see in the short term to turn this hypothesis into reality?
A golden cross with the 10dema (orange line) crossing above the 20dema (purple line) wouldn’t be the worst place to start. Add to that a rising MACD histogram, and you’ve got a couple of reasons to lean bullish SPY and QQQ.
TLDR
If there’s one takeaway from this week’s newsletter, it’s this: don’t confuse rotation with deterioration.
The headlines will continue to change. Narratives will continue to swing. The market will keep trying to convince you that the move you’ve just missed is the only one worth chasing.
I suspect the better opportunities over the coming weeks will come from asking a different question: where is capital likely to flow next?
That’s the hypothesis. Time will tell whether it’s right, but I’d rather put a view on the table and be judged by it than spend 40 minutes describing the direction of the wind.
Have a great weekend.
Best,
Alex
Disclaimer: The information contained in this newsletter is provided for educational and informational purposes only and reflects my personal opinions at the time of writing. Nothing here should be construed as financial advice, investment advice, or a recommendation to buy or sell any security. I may hold positions in securities mentioned. Always conduct your own research, consider your own financial circumstances, and consult a qualified financial adviser if appropriate. Investing and trading involve risk, and past performance is not indicative of future results.