International equities keep grinding higher with broadening participation.
And then we have the US indexes, which have been sideways, in high and tight fashion, since mid-May.
That changed this week…
The bulls got what they needed as a long list of these coils resolved higher.
We’ve been particularly interested in speculative growth, and ARKK is a great example of this bull flag theme, so let’s go there:
This is the same pattern we are seeing all over right now. A big time advance off the April lows into a 3-4 week continuation pattern.
And if there’s one thing we know about continuation patterns it is that their resolution should mark the continuance of the preceding price trend. Well, that direction is up.
And that’s exactly the direction these flags are picking this week.
So the information from the market is quite simple: We’re going higher. Next week should be a follow-through week.
I think the odds of pattern failure are quite low at this point. These flags had a chance to fail this week, and the bears did try. But the market powered through that bit of indecision, and by the close Friday, the evidence was clear.
This isn’t about ARK or speculative growth.
The S&P 500, Nasdaq 100, Russell 2000… they all resolved similar coils.
Sectors like industrials, technology, and communications… even materials! Did the same.
This pattern is breaking out higher all across US equities. Don’t fight it. Let’s keep riding this wave.
More growth stocks. More offense. More exposure to risk. Sprinkle in some commodities. Some international. It’s all working.
We want to keep pressing the gas on this V-shape recovery.
Look for the market to have a big week next week as these bull flags confirm and set off reaction rallies.
I like the way we are sitting with our speculative growth and commodities positions right now. Using options allows us to participate in a wide variety of themes with a low capital cost.
Due to the recent momentum, this is the highest degree of free-ride exposure we’ve had since last summer. These are simply positions where we’ve already realized enough profits to break even in the trade, regardless of what happens next.
