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Trading System Signals on July 2, 2024

Capstone Trading

There were many factors in the current cycle that would normally generate a very choppy day. The beginning of the week as well as the beginning of the month have typically been choppy and challenging lately. Jay Powell and two other Central Bankers talking for an hour on live TV along with JOLTS, would normally generate wild swings and stop running price action.


What was typically a very choppy scenario that we would avoid trading and use as "shake up" price action for a drawdown entry alert, ended up being a very trendy day. We continue to see the bulls find more and more "least likely" days to rally. We have also seen weak market internals be the origin of many rallies lately. Today, the market internals were relatively strong, which has been a sell signal in the Nasdaq lately.


The liquidity and pre-holiday trade were the factors pushing the markets higher which superseded the other factors. We have anticipated continued rallies but also anticipated a little more volatility and "shake ups" along the way to give us good drawdown entry alerts. Since June, the market not only insists that we are in a bull market, it insists that there won't even be a pullback.


The beginning of the year as well as May included some extreme stop running price action. Since June 1, the market has become extremely "quiet".


Some statistics that we heard on CNBC (be sure to fact check):

  • June 2024, calmest month in 5 years

  • In the last 50 years, there are on average 7, 1% down days in the S&P 500 during the summer months. So far, no 1% down days

  • No 1% down days since April in the S&P 500

  • 18 months since the Nasdaq 100 has had a 2.5% down day - longest streak ever


The strategies are performing well and the portfolios we released for July hit equity peaks today. We typically wait for drawdowns to enter and will continue to wait for a drawdown to enter. We are not "timing" the market but looking for entries to reduce volatility in the equity curve. We prefer to capture moves like we have seen today, but we don't want to "chase" the market or performance since that always introduces more volatility and this methodology has reduced our drawdown in Q2, 2024. This methodology has allowed us to miss some big losing days as well.


It is always affirming to see new equity peaks in the strategies that you plan on trading. A normal drawdown will have us back at the starting point of the month with a good entry point.


The VIX traded as low as 11.85 today and closed just above 12 at 12.03. NNVDA was down almost 2% on the day.


Since the market closes early tomorrow and is closed on Thursday, we will pick up trading system signal tracking on Friday. There is a Jobs Report in the pre-market on Friday. Have a great two-day holiday!

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