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The month of July has been a bit negative for the S&P 500, but only just. Keep in mind that as we are rolling over from July to August, we are in the midst of earnings season, and of course we have all of the nonsense going on in the Middle East. This continues to be a problem, and I do think that we have a scenario where traders are going to have to come to grips with the fact that the only certainty is going to be uncertainty. With that being the case, I believe that it is probably only a matter of time before you see a big move in one direction or the other.
Passive Flows and Key Technical Levels
All things being equal, though, when I look at the overall trend, it is positive, and as a general rule, the passive investing flows into the S&P 500 over the last several years have, for the most part, guaranteed that sooner or later, markets recover. I know that's a dangerous thing to say, but sell-offs are probably going to end up being a buying opportunity from that alone.
Even if we do break down from here, I would watch the 7,300 level and the 7,000 level both as potential support levels, and I would be more than willing to buy dips. To the upside, we have the 7,600 level offering resistance. That certainly was resistance during the month of July. A move above there would not only be a strong sign for me, but it also wouldn't be that surprising. I think we would more likely than not go looking toward the 8,000 level over the next several months.
There are questions about a potential interest rate hike, but ultimately, even if that were the case, longer term that means that the economy is still humming along in the United States, which, quite frankly, it is, despite the fact that some numbers recently have taken a little bit of a dip. With this, I remain bullish, but I also recognize that the occasional headline coming out of the Middle East and interest rates jumping around will continue to cause volatility swings.
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