Poised for a Bounce
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We take profit and exit positions on MRVL. Given in our Apr 5 post at $107, the stock has tripled to $320. With the AI theme faltering and an ongoing rotation out of tech (as explained further below), the weekly chart now shows a large bearish engulfing candle.
With SPX retesting the June 10 lows, positioning and technicals look poised for a bounce from here. Volatility is easing off (chart below) which means markets have a chance to stabilize and go higher. As we mentioned earlier, many of our breadth metrics are moving up (with the exception, perhaps, of Nasdaq).
Retail trading activity is breaking records — higher than the 2021 mania that gave us the GME short squeeze. Retail investors are the largest source of buying of late, and they are big enough to move markets. But watch out for the peak; as our previous studies revealed, retail will be the last to change their view.
It is the end of June and many US pension funds are in the process of quarterly rebalancing. That involves selling stocks to match their funding levels. This selling pressure should abate in the next few days as July 1st marks the beginning of a new portfolio allocation cycle.
As we said last week, July is the strongest month for stock market performance. A lot of retail inflows happen in July — mid year bonuses, 401(k) contributions, etc. Plus, corporates are reactivating their share repurchases.
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