🔥𝗧𝗲𝗰𝗵 𝗟𝗲𝗮𝗱𝘀 𝗠𝗮𝗿𝗸𝗲𝘁 𝗥𝗲𝗯𝗼𝘂𝗻𝗱 𝗮𝘀 𝗜𝗻𝗳𝗹𝗮𝘁𝗶𝗼𝗻 𝗖𝗼𝗼𝗹𝘀 𝗮𝗻𝗱 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗗𝗮𝘁𝗮 𝗜𝗺𝗽𝗿𝗲𝘀𝘀𝗲𝘀

𝗧𝘄𝗼 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗿𝗲𝗽𝗼𝗿𝘁𝘀 𝗮𝗽𝗽𝗲𝗮𝗿 𝘁𝗼 𝗵𝗮𝘃𝗲 𝗱𝗿𝗶𝘃𝗲𝗻 𝗽𝗼𝘀𝗶𝘁𝗶𝘃𝗲 𝘀𝗲𝗻𝘁𝗶𝗺𝗲𝗻𝘁 𝗼𝘃𝗲𝗿 𝘁𝗵𝗲 𝗽𝗮𝘀𝘁 𝘀𝗲𝘃𝗲𝗿𝗮𝗹 𝗱𝗮𝘆𝘀. 𝗜𝗻𝗳𝗹𝗮𝘁𝗶𝗼𝗻 𝗱𝗮𝘁𝗮 𝗰𝗼𝗻𝘁𝗶𝗻𝘂𝗲𝘀 𝘁𝗼 𝗺𝗼𝗱𝗲𝗿𝗮𝘁𝗲, 𝘄𝗶𝘁𝗵 𝗯𝗼𝘁𝗵 𝘁𝗵𝗲 𝗰𝗼𝗻𝘀𝘂𝗺𝗲𝗿 𝗽𝗿𝗶𝗰𝗲 𝗶𝗻𝗱𝗲𝘅 (𝗖𝗣𝗜) 𝗮𝗻𝗱 𝗽𝗿𝗼𝗱𝘂𝗰𝗲𝗿 𝗽𝗿𝗶𝗰𝗲 𝗶𝗻𝗱𝗲𝘅 (𝗣𝗣𝗜) 𝗶𝗻𝗳𝗹𝗮𝘁𝗶𝗼𝗻 𝗰𝗼𝗺𝗶𝗻𝗴 𝗶𝗻 𝘀𝗼𝗳𝘁𝗲𝗿 𝘁𝗵𝗮𝗻 𝗲𝘅𝗽𝗲𝗰𝘁𝗲𝗱 𝗳𝗼𝗿 𝗝𝘂𝗹𝘆.

Additionally, economic data remains strong, with both retail sales and jobless claims surpassing forecasts. These indicators suggest that the U.S. economy may be cooling, but it is not teetering on the edge of a sharp downturn or a recession.

As a result, last week, financial markets rallied from the August 5 sell-off, with the S&P 500 rebounding by over 6.5% and the technology-heavy Nasdaq surging by more than 8%. The 10-year Treasury bond yield, which had dropped to 3.66% during the market volatility, climbed back to about 3.9%, signaling renewed confidence in the broader economy. Moreover, the VIX volatility index, known as Wall Street’s “fear gauge,” spiked to 65 on August 5, its highest level since 2020, but has since eased back to under 15, aligning with the average over the past year.

The recent recovery in the stock market has once again been led by the technology and growth sectors, which had also been the hardest hit during the recent pullback.

As we approach a period of potential Fed rate cuts, I believe we may see a broadening of market leadership, potentially including a resurgence in smaller-cap and junior growth sectors. This pattern often emerges as bull markets near their end phase, with traders seeking undervalued stocks that have not yet participated in the bull run.

History tells us that if the Fed is cutting interest rates and the economy remains resilient, markets can continue to perform well. While market fluctuations are normal, particularly as we head into the seasonally weaker months of September and October, and then into U.S. elections, these periods of volatility and pullbacks may present opportunities to enter new emerging stocks and sectors.

In any case, closely monitor the technicals and “Trade What You See, Not What You Think”.

Harry Boxer, Author

Veteran Trader, Expert Technical Market Analyst & Founder of TheTechTrader.com