May CPI numbers came in higher than expected at 5%. The irony is that the factor that caused the technology stocks to pull back last month did not happened today. Instead, the Nasdaq continued its climb to close above 14,000.

Nasdaq Year to date performance

The core inflation rate which excludes food and energy prices stands at 3.8%, which is the sharpest increase in nearly three decades.

The used car prices pushed the inflation gains higher this time round too.

So what happened?

I believe that generally, investors are starting to buy the Fed’s opinion that the current rising inflation is simply transitory. This number is expected to taper off in the coming months.

I do believe that as well and i was sharing how the inflation numbers last month was distorted by car prices, airline tickets, etc; most of which was a result of pent-up demand during the lockdown and the ample cash that families are sitting on. Read here for the article written last month.

However, this time round, i thought that the market is getting too bullish with the Nasdaq closing above 14,000 again. This is the third time that the index has visited 14,000 this year and the market does look weary. Some defensive sectors like utilities and healthcare have been performing well lately, but the financial sector was pulling back since the start of June. There seems to be some form of risk-off rotation play in the background. And on the chart, it can look like a triple top, or an ascending triangle, or a head-and-shoulder formation. How it will turn out depends on the next few sessions right through the end of the month. For the technical analysis of Nasdaq, click here.

July, statistically has always been the start of the 4-worst performing months for the Nasdaq (July to October). I am looking around for clues whether this year will be the same and lately, the performance of the different sectors triggers me to rethink about positioning. After all, triple witching is just round the corner, and i would rather be safe than sorry.

No! I am not saying that the market will be bearish going forward, but more of a bull market correction to justify a healthy bull market. A market without correction can be scary and any corrections can be hefty.

My managing director once told me more than 15 years ago, “do not be too bullish and neither be too bearish”. I have always remembered his saying and it had kept me safe all these years. He has since joined politics. I heard him speaking in parliament recently.

Alright, just sharing some observation here. Hope readers will find it useful.

Have a great day ahead!