Over the past 30 years the S&P has averaged losses in only three months and we have just entered the worst two back to back with: Stocks at the highs, Yields and Spreads at the lows, Crude collapsing, Yen firming, and Bullish sentiment and positioning building on the back of a binary post Brexit low volume unconfirmed breakout to an all-time high in the S&P. While seasonality in isolation is never a reason to buy or sell a stock, given the fragility of the macro technical backdrop, I would hardly classify that as isolation.

Admittedly, the trend in the S&P is higher, breadth strong, the “reaction to news” positive, and the breakout from a multi-year trading Bullish. I don’t have a problem with any of that. It’s the rest of the chart book in conjunction with that seasonality that I take issue with. It’s a bad setup during a bad time of the year for a market which displays elements of both the housing bubble and the tech bubble at the same time. If it weren’t for the Emerging Markets I’d be really worried (wait, what?).

The “only” problem with that is with Crude and inflation expectations rolling, it is difficult to see EM continuing to carry the weight of the world on its shoulders. Moreover, given the strong correlation between Crude/Energy, EM and High Yield, it is difficult to see how the former continues to collapse without taking the latter down with it. The DAX has rallied right back into resistance and the FTSE 250 has faltered after a V shaped reversal back to its pre Brexit levels. The Nikkei has held up well in the face of Yen strength as the “back up” in JGB yields has buttressed Banks, a divergence which is unlikely to persist.

Healthcare acts well, and I would rather own Biotech on the breakout off the lows than Semi’s on the breakout to a new high. However, for all of the July fireworks in Tech and Biotech the NASDAQ Composite failed to make a new high and now enters a month in which it has fallen over 6% in 3 of the last 5 years.

In sum, I would rather own Gold and Volatility over just about anything for the next two months.