The S&P progressed higher during much of the month of July, but ended the month with a gap higher that failed and betrayed an area of strong resistance. We discussed this zone in previous letters as being the location of the initial sell-off which began in early 2022. It is not unusual for a market to re-test areas where a move initiated.
In this case it is likely that investors who held losses since 2022 lightened their losses when prices approached their entry. We see the July high as being a major pivot that may mark the top of a wide trading range that may last for years.
Recent Program Performance
Volatility was notably lower in July resulting in few trading opportunities for our programs. The Overnight Advantage program participated in a nice swing trade near the beginning of the month, and then spent much of the month in cash.
The Blended program continues to deliver consistent low volatility returns by taking advantage of both overnight and intraday opportunities. When volatility declines, we frequently see better risk profiles on multiday trades. This program is positioned to experience the best of both worlds.
Should the high in July mark the top of a wide trading range, we anticipate intraday volatility to increase as investors rush to exit their positions. Overnight trading may benefit from mean reversion trades resulting from fear-based overreactions.
We hope you are enjoying the summer!
Sam Beckers and Dario Michalek
Soaring Pelican, LLC