The Fed spoke last week and nothing happened to the rally. The Bank of Japan may start a new monetary policy era that could affect the US markets, but so far nobody is worried. The earnings season has been good, most of the companies are beating earnings expectations. Everything looks so good that the sky is the limit. But really, can the stock market go up straight from here? Seasonally, a stock market high could be made in August thru October. Based on the bullish momentum we have seen since the October 2022 low, it will take a lot of distribution to generate a short signal. In other words, the stock market is neutral at the moment. The stock market is too rich to deploy new money, especially during a season when the stock market has the tendency to make a high. At the same time, you can’t short the market because it’s too expensive. The momentum is too strong to short the market. Just have to wait!
Below is the S&P 500 daily chart. The well established channel lines drawn from the October 2022 low clearly show that the price is hitting the upper limit of the channel. It could jump over the channel line and fall back just to trap a few bulls. The yearly resistance level is at 4608 which was almost hit on 07/27/2023. So we are expecting a little bit of selling around this channel line. But this selling is not a trend changing event. The up trend will be intact for some time. The indices may not advance too much because of this resistance, but many individual stocks may make exaggerated moves during the earnings season.
Palantir was called “the Messi of AI” by Wedbush last Friday. It’s very unusual for an analyst to upgrade the stock right before Palantir earnings report on August 7. The upgrade caused the stock to run 10% last Friday. If the stock runs too much before earnings, it could set the stock to fall after earnings report. Regardless the short term moves, Palantir is a pure AI play that has many years left in the price appreciation.