Tech Strategist Eyes Market Rally, Oil Risks

Market momentum is strong, with the S&P 500 breaking out of a multi-month range fueled by broad participation. Last week, 75% of stocks closed above their 200-day moving average, the highest level observed since 2004. This rally extends beyond mega-cap stocks, with equal-weight indexes also reaching new highs. Earnings growth is robust, tracking double-digit figures with expectations for back-to-back quarters exceeding 20%. Even excluding the 'Mag 7' stocks, Q2 earnings growth was approximately 30%.

Despite positive technicals and fundamentals, risks loom. Concerns include complacency around oil prices and inflation expectations, with potential for Brent crude to challenge the $102 level. The 10-year yield is also a key watchpoint, nearing a multi-year consolidation breakout that could push yields towards 5%. A slow, gradual rise in yields accompanied by solid economic growth and accommodative policy might be manageable for equities. However, a rapid increase in rates could trigger significant selling pressure in US markets.