ETF Trades: NASDAQ’s Hot Julys & Biotech Turns Favorable By: Christopher Mistal | July 31, 2025 | Email | Print

In case you missed the member’s only webinar on Wednesday, the slides and video recording are available here (or copy and paste in a new browser window: https://www.stocktradersalmanac.com/LandingPages/webinar-archive.aspx). In the webinar we reviewed key seasonal pattern charts that we have been tracking throughout the year, current GDP and inflation trends, Fed interest rate expectations, and what we expect during the balance of the “Worst Months” which include historically weak August and September. We also provided an update to S&P 500’s current low volatility streak noting that how it ends could have an important impact on the subsequent direction of the market.

 

 

In the original research conducted by our illustrious founder and creator of the Stock Trader’s Almanac, the late Yale Hirsch, defined a “Hot July” market as a gain of 3% or more for the DJIA. Although DJIA did not reach this level, up just 0.08% this July, NASDAQ did. With the lone exception of 1980, every NASDAQ “Hot July” since 1971 was followed by a retreat that averaged 5.8% from July’s close to a subsequent low in the second half of the year. The worst decline was 18.4% in 1973 and the second worst was in 2022 when NASDAQ retreated a further 17.6% before its bear market finally ended in December. 

 

What really stands out in the following table is NASDAQ’s average retreat after a 3% or greater gain in July is heavily influenced by four double-digit declines while in other years the retreat was actually rather mild. The mild NASDAQ retreats were frequently over quickly with eight bottoming/ending in August.

 

 

This does appear to align with our expectations for a relatively mild pullback or consolidation, most likely sometime during the next two or three months. Tariff uncertainty is easing as deals are getting done but more deals are still needed. The longer-term impact of tariffs is still unclear. Today’s slightly warmer than anticipated PCE reading (the Fed’s preferred inflation gauge) following a larger than expected increase in CPI earlier in July, suggests that price increases due to tariffs may just slowly bleed into prices instead of a single or quick jump higher. If this is the case, then Fed rate cuts are likely to be pushed back as well. 

 

As noted in our August Almanac and Outlook over the past two weeks and on yesterday’s webinar, notoriously weak August is historically weaker in post-election years. However, with the market tracking the more bullish post-election year seasonal patterns after straying off course earlier this year, we suspect only a modest pullback likely in the 5-8% range during the balance of the “Worst Months.”

 

 

Two new bullish sector trades begin in August, but we are going to take a guarded approach. New long trade ideas are suggested on dips. If they do not dip below their respective buy limits, that is fine as we can consider them again when the “Worst Months” end.

 

The biotechnology sector enters its historical favorable season in August. iShares Biotech (IBB) can be considered on dips below its buy limit of $128.75. A stop at $113.62 is suggested. The auto-sell price is $169.89 based upon historical average performance plus an additional 10%. A 19.96% average gain has occurred over the last 25 years while an average gain of 4.85% has occurred in the most recent 5 years (page 94 STA 2025) from the beginning of August through the beginning of March. Top five holdings are: Vertex Pharmaceuticals, Amgen, Gilead Sciences, Regeneron Pharmaceuticals, and Alnylam Pharmaceuticals.

 

 

A second choice to consider for biotechnology seasonal strength is SPDR S&P Biotech (XBI). Unlike IBB, XBI tends to hold more speculative stocks with smaller market caps and its holdings are not as concentrated. XBI could be considered on dips below $84.20. If purchased set an initial stop loss at $74.31 and an auto-sell at $111.11. Top five holdings are: Moderna, Alnylam Pharmaceuticals, Incyte, Halozyme Biosciences, and Insmed.

 

 

Over the last 25 years, Info-Tech has generated an average return of 10.73%, and for the last five years the average has been a solid 13.77% during its bullish season from mid-August to mid-January. Our top ETF within this sector is iShares US Technology (IYW). Set a buy limit at $176.15 and an initial stop loss of $155.45 if purchased. Should high-tech produce above average gains, profits can be taken at the auto-sell price of $214.56. IYW’s top five holdings are: Nvidia, Microsoft, Apple, Broadcom, and Meta. These five holdings represent a whopping 53.8% of IYW’s total holdings. 

 

 

August’s final seasonality is a short trade in the Semiconductor sector. We are officially going to pass on this setup. The sector is getting hit today, but the downside is likely to be brief and limited making the risk/reward less appealing.

 

 

Oil’s bearish seasonality comes to an end in August. We officially passed on trading this setup in early June due to crude oil’s resiliency and geopolitical risk that could potentially cause energy to spike higher. There is no corresponding position in the portfolio.

 

“Worst Months” defensive position in SPDR Consumer Staples (XLP) can still be considered on dips below its respective buy limit. If the broader market does take a breather, XLP could see renewed buying.

 

SPDR Utilities (XLU) is on Hold. As of its close on July 30, XLU was up 14.0% and climbing closer to its auto-sell price of $88.93. AI and data center electricity demand has lifted XLU this year to above average gains.

 

FXE and FXF are on Hold. The US dollar has improved this week and reclaimed its 50-day moving average. It is currently close to breaking back above 100, a key level that was support during its retreat and could ultimately be resistance to additional gains. The rebound in the US dollar has come at the expense of other currencies weakening. Invesco CurrencyShares Japanese Yen (FXY) was stopped out on July 30.

 

European ETFs, IDV, EFAV, EFV, and EZU are mixed and can still be considered on dips below their respective buy limits. All four of these offer reasonable dividend yields and potentially some diversification benefits.

 

Last month’s trades in gold and silver related ETFs, GLD, SLV, GDX, and GDXJ have retreated modestly as the US dollar has strengthened and interest rate cuts from the Fed keep getting pushed further away. GLD, SLV, GDX, and GDXJ can all still be considered at current levels or on dips below their respective buy limits.

 

 

 

In accordance with the July 14, NASDAQ Seasonal MACD sell email Issue, QQQ and IWM have been closed out of the portfolio for gains of 31.0% and 21.2% respectively. As of today’s close, QQQ is just 1% higher than when it was closed out while IWM is actually lower.

 

Defensive positions in bond ETFs, TLT, AGG, BND, SHV and SGOV, are still flat to modestly negative. TLT, AGG and BND are on Hold. The performance of TLT, AGG and BND will likely depend greatly upon the timing of Fed rate cuts, which is not likely until later this year. Our preferred bond ETFs are SHV and SGOV as both exhibit relatively stable pricing and have yields exceeding 4%.