Kaminsky's Call: Defense and Aerospace, Crucial Tells for Market Direction

As I watched my boys play Tug of War during their sleep-away camp's visiting day, I could not help but think of the market.

Lockheed Martin's F-35
Getty Images
Lockheed Martin's F-35

That's because since July 4th, the S&P 500 has essentially been locked in its own game of Tug of War. Pulling in one direction, the bears who fear the dreaded "double-dip" scenario, which include a global slowdown and deflationary death spirals.

Pulling on the other side are money managers who are terrified of falling behind the market benchmarks. As a result, they hold their collective noses and buy anyway, forcing stocks into a sort of "melt up," where safety trades masquerade as bullish confidence.

My "Call-to-Action" is to watch the final week of July very closely, as it could to determine the direction of the market for remainder of the summer and into the fall. And here's where you should look.

Defense and aerospace companies report this week, and they very well could determines who wins this game.

While banks and tech grabthe headlines, aerospace and defense stocks are cyclical, and therefore serve as crucial tells for market direction.

This week, Lockheed Martin, Boeing, General Dynamics, Raytheon, and Northrop Grumman all report.

Should numbers, and most importantly, guidance, come out positive, look for the rope to finally move in one way, and take the markets higher. The opposite is also true. For those who follow the retail stocks, they end their quarters on Friday, so let's watch closely whether they issue guidance as well.

Money managers have been waiting (some would say stalling) to get to this point. But this is the moment when we'll see whether they pull harder to prevent under-performance (and buy more stocks), or simply throw in the towel and let go of the rope altogether.

Either way, the game is always captivating.

Programming note: "The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.

Gary Kaminsky does not hold any equity positions.

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