Second-quarter earnings season starts this week when JPMorgan Chase (JPM) and Goldman (GS) report on Tuesday morning. A number of other large banks also report this week, and then we move into mainstream names in the next couple of weeks. Small companies generally do not report until the end of the month or early August.
The primary market theme all year has been rotation, and that is going to continue for a while. The market can't seem to decide if it wants higher interest rates or lower rates. High rates are a function of inflation, and that can cause problems with valuation, but lower rates may indicate concerns about economic growth, and that can be a problem.
The interest rate debate has resulted in rotation in and out of some of the big cap FAANG names lately and has been a challenge for financials, commodities, growth, small-caps, and a wide variety of other groups.
An additional complexity recently is that the folks in the business media are focused on the major indices, which are hitting new all-time highs, and seem blissfully unaware that much of the market has been struggling. It is unusual that while the indices are so strong, only about 44% of stocks are over their 40-day simple moving averages. Sectors such as biotechnology are in bear markets, and ETFs that focus on growth like ARK Innovation ETF (ARKK) and Innovator IBD 50 ETF (FFTY) are still well under the highs they hit back in February.
Rotational action is hitting again Monday morning as the FATMANN names and the Nasdaq 100 ETF (QQQ) are indicated higher while the DJIA is indicated lower.
China continues to crack down on a number of China-based technology names, which is causing some problems, and oil and commodities are losing some momentum as concerns about growth start to bubble up. Financials are indicated lower as well as investors will consider how earnings have been impacted by the level of interest rates.
The action has been quite inconsistent, with daily shifts between rotation and correlated action. The market is searching for a theme but seems to be confused about interest rates and the level of growth. Speculative trading has cooled, and even the meme traders are having a harder time the last few days.
My game plan is to stick with shorter time frames and to watch for favored names to find some support. I don't see much reason to be very aggressive right now.