Rally caps? Or capped rally? On Wednesday morning, European traders sold Tuesday’s pop. They sold stocks, they sold cryptocurrencies, and they sold commodities. I saw WTI Crude trading with a $103/$104 handle into the wee hours after trading with a $110/$111 handle on Tuesday night. However, capital was flowing back into US Treasuries early this morning. I see the US Ten Year Note paying 3.22% as creatures of the night pass through my trash cans after dropping as low as 3.3% on Tuesday night.
It was quite the rally on Tuesday. The S&P 500 gained 2.45%, the Nasdaq Composite 2.51%. Small caps were hot, but less…the Russell 2000 rallied 1.7% after last week’s wipeout. There was undoubtedly a considerable level of short hedging done on Tuesday as algorithmic traders, sniffing blood in the water, forced something like pressure. Profit taking works both ways. Warning.
The 11 SPDR ETFs selected by the S&P sector gained ground on Tuesday, led by last week’s pariah Energy (XLE), up 4.01% for the session. Expect a good chunk of this race to take place on Wednesday. Consumer Staples (XLP) and Technology (XLK), two sectors not generally considered correlated or anything close, gained 2.62% and 2.28% for the day. Semiconductors were a bit hotter than the broader market. The Dow Jones US Semiconductor Index gained 2.92%, while the Philadelphia Semiconductor Index rose 2.75%, led by manufacturing equipment suppliers Applied Materials (AMAT) and KLA Corp ( KLAC). These two rose 5.94% and 4.9%, respectively.
In terms of magnitude, the winners beat the losers by a rough score of 5 to 2 on the NYSE and almost 9 to 4 on the Nasdaq market site. The volume advance took a 79.8% share of the NYSE composite trade and 72.3% of the metric for Nasdaq-listed stocks. Overall trading volume was down on Tuesday compared to Friday, but this is not an apples to apples comparison as Friday was a “triple witch” expiry event. Aggregate trading between the constituent members of the S&P 500 and the Nasdaq Composite was the lightest on any day since last Tuesday, suggesting that not everyone jumped on board Tuesday’s rally.
Islands in the stream
Readers will recall that I called for a sloppy but potentially bullish end to June with Jerome Powell’s twin appearances before legislative committees scheduled for today (Wednesday) and tomorrow, with Fed stress tests tentatively scheduled for tomorrow, with Russell’s reenactment event. for Friday and for the as-yet-unknown impact of mandatory monthly and quarterly pension fund rebalancing next week. After that, markets could resume pricing in the depth and breadth of public pain likely rendered by the current recession (or near-recession, you choose).
For the short to medium term, readers will see below, as the Nasdaq Composite has seen a number of gap openings in recent days, almost back-to-back “island reversals”…look at that. ..
Do you see the gap increase on May 27 and the gap decrease on June 10? This group of nine candles created what we call a bearish island reversal, and as you can see, it worked out pretty well. Now see the gap down June 13th this is the start of a sloppy looking island that lasts throughout the present and is or was in the form of a bullish reversal of the island. Would (and still can) signal a market that would do well for my late June thesis. Problem?
I am not sure. Of course, island reversals can fly solo, as if they contained only one candle. It would be Tuesday (yesterday)…
Tuesday’s candle, if equity index futures, which were down sharply this morning, stay lower, will create an island within an island, and in this case a bearish reversal contained within a potential bullish reversal. Volatility? Yeah, no kidding. Hey, the short cover is over for now.
What could have happened?
Well, a number of things have been said, a number of conditions have changed since Tuesday’s rally. In fact, you’ve probably noticed that the sale actually started with about 45 minutes remaining in Tuesday’s regular session…
Speaking from the Roosevelt Room in the West Wing of the White House on Tuesday afternoon, President Biden said… “We need more money to plan for the second pandemic. There is going to be another pandemic. We have to anticipate.” Absolutely terrifying. Did I mention that keyword reading algorithms kick in microseconds because milliseconds are too slow?
Billionaire hedge fund investor Ray Dalio, in a LinkedIn post, wrote…that he thinks it is “both naive and inconsistent with the workings of the economic machine” (to think that the central bank) “will fix things once it gets inflation under control”. Dalio later added, “The only way to raise living standards in the long run is to raise productivity and central banks don’t do that.” I don’t always agree with everything Dalio says. On this, he is right.
Speaking at a webinar hosted by the National Association for Business Economics, Richmond Fed Pres. Tom Barkin said…”We’re in a situation where inflation is high, it’s widespread, it’s persistent, and rates are still well below normal. The spirit is that you want to get back to where you want to go as fast as you can. possible without breaking anything.” Well, no spitting, Sherlock. Thank you, Captain Obvious. Barkin speaks again later that day.
On Tuesday, Bloomberg News published an article written by Matthew Boyle citing the recent erosion of labor market health in the USA. Boyle reminds us that Amazon (AMZN) and Walmart (WMT), the nation’s two largest private employers, recently announced an attritional herd “shrinking” as initial jobless claims began to rise on an average four-week mobile. . Boyle also notes that according to the job market website “Indeed”, job postings have slowed lately, in several sectors.
Geopolitical tensions have increased across the Baltic region. In response to Lithuania’s announcement that it would block the transit of sanctioned goods to the Soviet, I mean the isolated Russian province of Kaliningrad, Nikolai Patrushev, secretary of the Russian Security Council, said that Russia “will certainly respond to such hostile actions”. Their consequences will have a serious negative impact on the Lithuanian population.” Lithuania is both a member of the EU and NATO. On the other hand, Estonia, also a member of the EU and NATO, and in the same neighborhood, accused Russia of faking missile attacks on that nation, while saying a Russian border patrol helicopter flew into Estonian airspace on June 18.
Russia, for its part, has announced that part of its Baltic Fleet will soon carry out “large-scale” naval maneuvers in the Gulf of Finland that will include minelaying, live fire and anti-submarine drills. -sailors. NATO is due to hold a summit next week in Madrid.
So, are we going with Metaverse?
Because some of you called it the Omniverse.
On Tuesday, the formation of a new group was announced… The Metaverse Standards Forum, where the hope is to establish standards that will be widely used by most or all participants. The Internet of tomorrow (or perhaps a little further than that) will be an immersive 3D virtual world of augmented and/or virtual realities, Internet economies, next-level games, and interactive avatars. Man, I’m glad I grew up in the days of looking people in the eye, doing a quick assessment, and shaking hands.
Founding members of the new group include Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), Unity Software (U), Adobe (ADBE), Alibaba (BABA), Autodesk (ADSK), Qualcomm (QCOM), Sony (SONY), and Wayfair (W). A fairly notable exception from the group was Roblox (RBLX). The Forum will meet for the first time in July.
Delicious “red”
UBS analyst David Vogt pointed out that Apple iPhone shipments (AAPL) significantly outperformed in China in May, gaining market share. As if we didn’t all see this one coming. Vogt, rated four stars on TipRanks, has a “buy” rating on the stock with a target price of $185.
Economy (all Eastern times)
07:00 – MBA Mortgage Applications (Weekly): Last +6.6%.
08:55 – Red Book (weekly): Bottom 11.4% y/y.
1:00 p.m. – Twenty-year bond auction: $14 billion.
4:30 p.m. – API oil inventories (weekly): Last +736K.
The Fed (all Eastern times)
09:30 – Speaker: Federal Reserve Chairman Jerome Powell.
12:50 p.m. – Speaker: President of the Chicago Fed. Charles Evans.
1:30 p.m. – Speaker: philadelphia cream Close. fed. Patrick Harker.
1:30 p.m. – Speaker: richmond Close. fed. Tom Barkin.
Highlights of Today’s Earnings (PSE Consensus Expectations)
Before the Open: (KFY) (1.55)
After the close: (FUL) (1.07), (KBH) (2.03), (WOR) (.83)
(XLE, AMAT, AMZN, MSFT, NVDA and AAPL are interests in the Member Club Action Alerts PLUS. Want to be alerted before AAP buys or sells these stocks? Learn more now.)
