Weekly Market Outlook: The Setup of The Summer

This week is going to mark a big turning point in the for the summer rally.

Monday we have NVDA stock split going into effect, Tuesday we have GME earnings after the close, and Wednesday we have both CPI and FOMC on the same day.

With stocks breaking out to new all time highs and crypto consolidating just below the highs I like this setup for a big breakout and the beginning of a larger market rally to follow.

As readers know we have been highlighting this date of June 9-12 for several weeks now.

Let’s take a look at why it’s shaping up to be important.

First of all, the sentiment here seems to be off. Just over the last week we have our two sentiment surveys border lining on fear.

That doesn’t seem to add up when the S&P500 just made an all time high.

In fact, if we look at the SPX like we pointed out last week, the bulls are firmly in control here. Clear demand from buyers stepping in and absorbing the sell pressure over the last few weeks.

We had 4 days in a row where the market ran down and then closed near the high. This is very similar to what we saw pretty much all of 2023. Everyday the market would run down then close up. That’s bullish.

We also have the seasonality of this cycle in our favor. If we look back at the cycles with a democrat incumbent running for reelection it has only happened 16 other times in the history of the country.

The three most relevant cycles to us, we covered on Friday, and they all point to a large rally unfolding now through the end of July. So this is normally a bullish period with the yearly lows being put in.

The setup for crypto is even more bullish.

With many alts down 90% and traders having been chopped up in this range sentiment seems to be pretty low especially judging by CT in recent days.

We even have a supposed record short position on BTC similar to the short position on the IWM right now. Meaning people are shorting risk big time.

With sentiment where it is and the stock market breaking out to new highs in a strong seasonal period I think BTC is going to surprise to the upside this week.

Here is a fractal from NVDA over BTC after it broke ATH and then consolidated after making a top.

NVDA was under $500 dollars here. Once it broke out it did over 2x. It was also a 90 day range or consolidation, the exact same time as our current BTC range.

And if we follow the only other time in BTC history where the above election scenario was in play it was 2012.

In this cycle we had a March 14 top followed by a 90 day consolidation that ended with a low on June 11 after a breakout. Then a huge run into August unfolded.

So a similar setup in equities and crypto from a seasonality/cycle standpoint.

But looking at alts is what really makes me bullish.

This chart is called OTHERS it’s the entire crypto market cap minus the top 10 cryptos by market cap. So it’s a good signal for risk on in smaller caps. Surprisingly, the market cap less than 300bln but thats something to consider for the broader picture.

Here we can see the wicks on the downside of the weekly candles showing support from buyers here. Also notice price is making higher lows on the weekly while the RSI was making lower lows. A bullish setup. Last, notice how it has not had 3 consecutive red weeks. I think this week will push it green.

Overall, I believe we are on the cusp of a broad summer rally for risk assets that should start this week and take us into the second half of July.

We gave the starting signal for risk on to start in mid May and after a few weeks on the quieter side things should pick up again. Many fundamental alts are down 90 percent and traders have certainly gotten chopped up in this range based on what I’m seeing on CT.

I think the market has sufficiently washed out much of the earlier gains in the year and is ready to reset after people have given up.

Memes have been king so far this summer and that is presenting a great buying opportunity on the fundamental side. We will see a rotation back to the AI/RWA/GAMING narratives so be on the lookout for meme profits to rotate there.