The Dow driving forward with record closes each day this week, and the blue chip average riding earnings growth and Nvidia's SpaceX linked momentum and the S&P 500 also hitting records Tuesday and Wednesday, though giving back gains yesterday.
And meanwhile, the Nasdaq sank yesterday and not weighed down by the earnings selloffs in AMD and SpaceX.
So joining me is Jim We, writer for Macro Tides.
Jim, thank you so much for joining us.
Good morning.
A lot to talk about today.
So how's it going today?
It's going good, Johnny.
Great to be joining you.
All right, Jim, let's go ahead and start with the S&P 500.
You tracked the S&P 500.
So what have you seen play out and what key technical levels should we be watching for?
Well, my expectation, Johnny, was that as long as the S&P held above 7294.
That we were going to see a breakout above 7620 and make a move to the 77, 7800 level, which obviously is what's transpired over the last week.
The market's gotten a lot of good news.
Earnings have been terrific.
The Fed didn't hike.
Oil prices have come down, and so that's a lot of good news that has caused the technical breakout.
And near term, I think the market is going to digest what we've seen.
Um, in, you know, for the last 4 or 5 days.
The one cautionary tale here is why I thought the S&P would break out, Johnny, was that semiconductors were down over 25%.
Mag 7 stocks had been hit pretty hard.
I thought they were due for a pretty good bounce.
They've gotten that.
So, even as the S&P has made new highs, those other averages like the NASDAQ 100, the semiconductor index, They have not.
All they've done is retrace the big decline.
So, to me, I think we see a little bit more upside, Johnny, but then I think there's risk for a pullback.
All right, so let's go ahead.
Jim, I want to talk to you about commodities, gold breaking out the past few days after weeks of the range bound trading.
So break this down for us.
What does this mean?
Well, I, I was bullish on gold, primarily, Johnny, because, uh, gold topped at 55.95 in January, pulled back to 3945.
My expectation was we were going to see gold rally to 43 to 4400 very quickly based on the chart pattern.
And that's kind of what we've Seen gold tipped a little bit over 4300 on the cash yesterday.
I think we're going to make a move 4500 to 4700 over the next handful of months.
So I've been positive on gold and the gold stocks, uh, just more based on technical analysis and chart analysis than anything else.
So, Jim, you also recommended the Van Ek Gold Miners's ETF back in July.
So walk us through the price action.
Well, the price action is kind of following what I was expecting, Johnny.
Uh, basically, in late June, uh, I recommended buying GDX at about 72, uh, 80.
Expectation was it would rally toward 88 to 92.
We, I think we got to over 84.
So, I think, again, GDX dropped.
From 117 to under 70, it was due a retracement bounce that could be, you know, somewhat significant.
So, if gold follows through, I think GDX can make it up to 102, uh, but we're talking months down the road in terms of that, uh, expectation.
All right, Jim, so the big talk right now here on Wall Street is the July jobs report tomorrow.
So after a sluggish ADP report, what are you watching and how can it impact the Fed?
Uh, good question.
Uh, you know, the Fed believes, and I agree with them, that all we need is about $300,000 to 50,000 new jobs a month to keep the labor market in balance.
So to me, those, that's the borderline in terms of jobs above that level or below.
I think the odds are the Fed is going to raise the funds rate when they meet in September, Johnny.
If you look at the two-year Treasury yield over many, many, many years, It leads the Fed funds rate.
The two-year yields up around 420.
The funds rates 363, so the two year pricing and not one, but more than two rate increases.
So unless that comes down significantly between now and I think September 17th or 16th when the Fed meets, I think the odds are they're going to raise the funds rate when they meet.
All right, Jim, so I want to get your overall look outlook for the markets.
Do you think that the Dow will continue hitting records and is AI trade volatility in the rearview mirror for the moment?
Uh, well, for the moment, uh, I think there's a real risk, Johnny, that we're gonna see the semiconductor index and other related AI stuff go through another pullback.
My, you know, I'm thinking about the S&P getting up to 7700 or so.
I think we're nearing the end of the rally that began on March 30th.
What that implies is we're likely to see a decent sized pullback, 4 to 7%.
If the Treasury yield, the 10-year Treasury yield gets above 5%, which I think it will in coming months, that could be one of the triggers because higher ten-year yields pressure high growth stocks because it compresses their PE.
So I don't think we're completely out of the woods yet, uh, Johnny.
So, yeah, we had this rally, um, but I think we have to be careful that there's gonna be a pullback before we see, uh, you know, another decent sized rally to the upside.
So, short term, OK, a little bit more upside, but I do think we're setting up for at least a 4 to 7% correction over the next couple of months.
So Jim, overall, just give us your outlook also regarding smog caps.
What's your view there?
The the Russell 2000 made a marginal new high yesterday.
Again, I think that is also completing the rally that began at the, you know, at the bottom in March.
The role of the strength index on the semi or the Russell 2000 didn't confirm.
So what it shows, Johnny, is that, yeah, we made a new high, but it's doing so on less strength.
If the 10-year Treasury moves higher, I think small caps. are going to be vulnerable.
So again, I think we're nearing the point where a pullback is likely.
The market's had a lot of good news over the last few weeks.
Earnings are pretty much behind us.
I think attention is going to start to focus on the Fed, and as I said, I, I think they're going to raise the funds rate in September.
That's not the end of the world, but for a market that might be vulnerable to a pullback, you know, that's something that would cause some people to say, you know what, I'm going to take some chips off the table.
Well, Jim, definitely gonna be interesting to see what happens in the next upcoming weeks and months.
Obviously, it's always a fun time here down on Wall Street and just kind of analyzing and seeing what exactly is going on in the economy.
Jim Wells, thank you so much for joining us.
Thank you, Johnny.
It was, uh, I appreciate it.
