The NASDAQ led the rally post-COVID. It peaked in February 2021. The NASDAQ has been range bound 2/16-6/21/2021. The DOW took leadership (growth to value rotation) from February to May. Now the NASDAQ is breaking out and taking leadership. The week of July 5th remains a key point in time and it is then where we could find a new high in the NASDAQ, but if that fails to show up in the DOW, this is not looking very good in the months that follow. There may be a sharper correction coming in August-October which is the second target this year for a key turning point.

We clearly have a back and forth switching in the role of leadership here which is typically the sign of the market is getting tired. We are also starting to see real estate peak out here in the 2nd quarter and speaking to contractors in Florida, they are already starting to see a reduction in demand. In 1929, the real estate boom also ended ahead of the high by 2 years. We are not looking for a 1929 style event here though.

Nevertheless, this market is being driven not by expectations of a never-ending economic boom as was the case in 1929. This one is being driven by confusion in fiscal spending and government sustainability.

Technically, the NASDAQ and S&P 500 have made new highs and are in breakout position.  The DOW has not taken out the prior weekly cycle high at 35091.56 so far.  In order for the market to rally throughout the summer, the DOW must take out the prior weekly cycle high at 35091.56 by the first week of July.  If the DOW fails to do so, the market could spend the month of July doing nothing, and then correct sharply in August – October.  It would be 17 months since the March 2020 low in August.  That is a good place to have a meaningful correction.

So at this moment we are watching the DOW for confirmation.