Almanac Trader

DJIA was up 3.3% July 2023. Gains of this magnitude for July, however, have frequently been followed by late-summer or autumn selloffs and better buying opportunities in late-summer or autumn. In the past, full-month July gains in excess of 3.0% for DJIA have been followed historically by declines of 6.9% on average in the Dow with a low at some point in the last 5 months of the year. 2022 case in point.

We’ve been hearing everyone’s now expecting a correction. Maybe the technicians and savvy traders are. But the rest of the world has become quite bullish recently. Investors Intelligence bullish % hit a new recovery high. 

Now the sell side that was bearish are getting bullish and the few that were on board with the bull early on like us – all great technicians who we respect – are doubling down. While many “in the know” are expecting a seasonal correction the bulk of the rest of the world the “real market” is starting to finally get bullish again.

One little news item, the downgrade by Fitch of US debt has exposed the uncertainties, the overbought conditions and seasonal weakness is rearing its perennial head. Like Octobephobia, August-September seasonal weakness can easily become a self-fulfilling prophecy.