When the U.S. job report indicated a slowdown in hiring, markets started Friday, July 7 trading on an uptrend. By 1 p.m. the market erased the daily gains. S&P 500 added only 0.1% for the week. Investors need to prepare for a flat, directionless market for the summer.
Gamblers are buying 0DTE options on high volumes. This is a risky attempt to profit from the daily volatility. S&P 500 only needs to move slightly for the day to create 0DTE trading profits. These instruments will create short-term gains until the market patterns change.
Patterns always return until they do not. The Fed will very likely raise rates again by 25 bps. They need a slower economy to bring down inflation. In addition, the hot wage growth from the job report is a concern. The more wages rise, the more pressure it exerts on prices.
Investors should avoid long-duration U.S. treasuries for now. The TLT ETF broke down after failing to break out above $104.
Avoid semiconductors. May firms like Samsung, Micron (MU), and Intel (INTC) gained as revenue fell Y/Y. The AI hype does not apply to memory and CPU suppliers. Only GPU firms like Nvidia (NVDA) and AMD (AMD) may thrive.
Increase caution. Markets have more downside risks after the strong 2023 performance.
