Price action
On Saturday 21 June, America struck Iranian nuclear targets at Fordow, Natanz, and Isfahan. QQQ was choppy at Monday’s open, but didn’t break down. Later during Monday’s session, news broke that explosions were heard over Doha in Qatar where America has its largest base in the Middle East, Al Udeid. However, it quickly became apparent that Iran’s missile attack on the base was de-escalatory in nature. The base was empty and Iran had telegraphed the attack to enable American defences to repel it, with Al Udeid suffering minimal damage and no casualties. This was a face-saving exercise on Iran’s part, which revealed their unwillingness to escalate. The oil ETF, USO, fell -8%, and stocks rallied. After an Israel/Iran ceasefire was announced on Tuesday, QQQ marched on, breaking through the resistance zone at 540, then on to new all time highs by the end of the week.
QQQ’s daily RSI is now about 70, which is elevated but not extreme. QQQ is not yet extended from its moving averages, so we’re not too overbought just yet. The long-term weekly chart looks bullish, with QQQ holding above its 200dma for seven weeks and the appearance of a Golden Cross signal as the 50dma crossed back above the 200dma.
The Fed
This week’s Fed speakers suggest there is some division within the FOMC. On the one hand, JPowell continues to emphasise the wait-and-see message, unwilling to bring forward cuts until they have more clarity on the impact of tariffs on inflation. That view was echoed by Goolsbee, Bostic, Hammack, Schmid, Collins, and Barkin.
On the other hand, Fed Governor Miki Bowman on Monday joined Governor Chris Waller in the let’s-get-on-with-it camp.
Bowman (Mon): open to cutting rates as soon as July if inflation pressures stay contained, time to consider adjusting the policy rate, should put more weight on downside risk to jobs, trade policy likely to have minimal impact on inflation, data not showing much impact from trade policy shifts.
Two other FOMC members this week also speculated as to the timing of the next FFR cut, with Daly suggesting “Fall looks promising for a cut”, and Kashkari noting that September could be the moment for a cut. These comments suggest the FOMC is shifting to a more dovish stance.
Another potentially dovish dynamic relates to the question of who will succeed JPowell as Fed Chair when his term expires in May 2026. President Trump wants a dove who will cut rates aggressively. There are a number of candidates in the mix, including Governor Christopher Waller, who last week came out in favour of a July cut, which no doubt made a favourable impression on Trump. The combination of loose fiscal policy and accommodative monetary policy is constructive for economic growth, earnings growth, and QQQ.
Markets & Narratives
Trump claimed that America’s strikes on Iran’s nuclear facilities were an unqualified success.
However, some doubt has surfaced about that positive appraisal, opening the door for this story to make a comeback at some point. We will see.
Elsewhere, DXY and the US10y yield continue to ease back, which constitutes a tailwind for America’s multinational megacap growth stocks.
Breadth
Breadth improved somewhat this week, with the % stocks above their 40dma turning up, and the S&P500 advance decline line posting a new high with the index.
Sentiment and Positioning
Last week we noted the NAAIM survey hit 94, not far off the danger zone around 100. However, this week, it fell back to 81, which is constructive for further upside in stocks.
The 5-week MA of the AAII bull/bear ratio continues to be depressed, which is also constructive.
The Goldman Sachs US Equity Sentiment Indicator picked up this week, but is still nowhere near stretched.
Equity long/short hedge funds net leverage is not extended.
Seasonality
We are entering a particularly bullish period for the Nasdaq 100.
Summary
Price action: QQQ broke out to new all time highs above 540 as a ceasefire was announced in the Middle East. QQQ has spent seven weeks above its 200dma, a Golden Cross signal triggered as the 50dma crossed above the 200dma, QQQ has reclaimed the primary bullish trend channel in play through 2023-2024.
The Fed: While JPowell continues to emphasise the Fed is in wait-and-see mode, several FOMC members have suggested a cut may be appropriate in July or the autumn. President Trump has expressed an intention to appoint a dove to replace JPowell next year.
Markets and Narratives: for now, Middle East headlines are receding. DXY and US10y yield are easing, which is constructive for QQQ.
Breadth: improved this week.
Sentiment: most surveys continue to suggest light positioning and/or neutral sentiment, which is constructive for QQQ.
Seasonality: July is a bullish month for QQQ.
Key events next week: Tuesday - ISM manufacturing, Thursday - NFPs, ISM non-manufacturing. 3 1/2 day week for US markets.
View
Short-term: waiting for a pullback to enter a tactical long.
Long-term: bullish.
Technical evidence
QQQ has spent seven weeks above its 200dma, a Golden Cross signal has triggered, and QQQ has reclaimed the bullish primary trend channel in play through 2023-2024.
Realised volatility is consistent with bull market conditions.
Breadth was very bullish off the lows, evidenced by a sequence of thrust signals with good statistical records (Zweig breadth thrust, HY bond breadth thrust, Degraaf breadth thrust).
Sentiment and positioning on the whole suggests investors remain lightly positioned, which is bullish.
Fundamental evidence
Trump admin continues to walk back hardline trade policy.
Middle East headlines are receding.
Recent economic data shows economy is ok.
Supportive themes in tech (AI, defence, nuclear energy, cybersecurity).
Fiscal stimulus set to continue absent a bond market revolt.
Expectations are rising that the Fed may cut rates in the coming months, and that Trump will select a dove as JPowell’s successor.
Challenges and risks
Tariffs and immigration policy may lead to upside inflation surprises in coming months, though there is no sign of this yet.
Weak seasonality in Q3