Hoping this email finds you well today. Your readership is valued and appreciated. I want to take some time today to go over my current view of the broader markets and look at each position that may be held.

There comes a time when a trader has to change his perspective on a market. For me, that time is now. I would like to consider using today’s bounce to begin lightening on most long equity positions.

There are several factors not resonating well with me at the moment. For the time being, I would rather look to sell the rip versus buying the dip. This process would begin by removing certain long equity positions.

The delta variant, interest rate confusion, seasonal tendency, percentage of stocks trading above their 200 day moving average, and what appears to be runaway inflation just doesn’t paint a pretty picture in my eyes right now. To me, those factors do not warrant being long many names for longer-term swing trades.

Let’s consider the following for the markets that we have been covering:

1. SPDR S&P Bank ETF ( KBE ) Initially, we considered a long entry between $48.11 - $49.39/$50.00. Consider using today’s bounce to lighten up any long positions by half or liquidating all longs. If we get another up day tomorrow, that could be a good spot to close any long positions. We were trading north of $49.00 the last time I checked.
2. Defiance Quantum ETF ( QTUM ) between $44.00 - $49.50. Consider closing longs between $47.50 and $49.00 here to lessen long side equity exposure.
3. Invesco MSCI Sustainable Future ETF ( ERTH ) - I like the theme of this one given the administration and feel like ERTH could be held a bit longer. However, I like GRID more. So, consider lightening up/closing longs between $66 - $67.
4. Invesco Solar ETF ( TAN ) This traded very well off its 50-day SMA yesterday ($80.58) and I still like this theme. Consider keeping this if long, as I think there will be better exit opportunities at better pricing.
5. iShares 20 Plus Year Treasury Bond ETF ( TLT ) - Recently a sell opinion. Let’s begin to look for an exit today and potentially tomorrow if we get another day going in our direction. The interest rate confusion, pressure from congress on Powell, mixed signals from Powell on inflation, and overall equity jitters due to the delta variant could derail rates from increasing (among other reasons). Look to exit any short positions between $148.00 - $150.00.
6. Invesco Exchange-Traded Fund Trust - S&P SmallCap 600 Pure Value ETF ( RZV ). Let’s consider closing any long positions into today’s market strength. $88.75 - $90.00 would be nice to see.
7. iShares Global Timber & Forestry ETF ( WOOD ) Let’s consider closing any longs with today’s strength or any strength tomorrow between $85.00 - $86.50.
8. First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund ( GRID ). I think we can hold this one and wait for some infrastructure news or prints in the high 90’s for an exit level.

What does it all mean?

Trading requires discipline and nimbleness. The market could continue to move higher off yesterday's lows and reach all-time highs by the end of the week. It is possible. But given the reasons I have been mentioning, there is uncertainty in the market.

I do not think the uncertainty is fully priced into the US equity market right now.

While buying the 50-day SMA yesterday would have been a success (so far at least!), like we have done on two occasions in the $SPX, there is more uncertainty and more negatives working against this market than on those last two occasions. I feel like there are going to be some nasty surprises in store coming up (it is experience and intuition more than anything combined with the facts that I have stated).

This doesn’t mean that I am endorsing to flip and go short on the $SPX here. I want more time to pass and then begin to identify and execute new strategies, both on the long and short side, in the near future.

We are also coming into a historical soft period of seasonality for the $SPX here.

From 1980 - 2019 ($SPX):

• July: +0.79%
• August: -0.15%
• September: -0.70%

It just so happens that we are up 0.82% in the month of July right now.

This is also something to keep in mind as we move onward, forward, and upward.

Thanks for reading today’s Stock Trading Alert! Your readership is valued and appreciated. Have a great afternoon!

Thank you,

Rafael Zorabedian
Stock Trading Strategist