Chop Coming Up

 We haven't had a chop trade in quite some time, its been dip and run on the daily since the November 2020 election.  Over the past 9 months, SPX has gone from 3280 to 4380, or a 44.7% annual rate.  The valuations are sky high.  The momentum unbelievably strong.  But historically, the SPX usually back tests breakouts and don't normally go up in a straight line.  There hasn't been a lot of trade between 4250 and 4350, and its a bit of a volume vacuum.  I expect that vacuum to be filled with some choppy trade from 4250 to 4350 over the coming weeks.   

I don't expect a V bottom this time around like you saw off the June dip, just because of the lack of consolidation between the 4250-4350 area.  Also, seasonally weak time of the year, from mid July to early October, so you have almost 3 months when SPX makes almost no gains historically.  Still have Delta variant fear, and that probably doesn't dissipate until you get to lower levels and have more of a flush out of weak hands, or a few weeks pass by.  

Long term, its still setting up for a parabolic rise later this year, but my base case is for a choppy period for the next couple of weeks, and then assess the situation from there.  

If we do get that chop that I expect, that should take 10 year yields down towards 1.10%.  The bond market is confounding a lot of people, who can't explain the price action other than saying its short covering.  That's usually a sign of a strong market.