The major indexes were mixed for the week. The large-cap benchmarks and the technology-focused Nasdaq Composite index manage record highs before pulling back Friday to end the week with modest losses.
A busy week for earnings, but a very humble week for the indexes. They were down marginally on the week, with the Nasdaq 100 leading the big three lower. The nice part this week was the resource stocks, like metals and US energy did better. Financials were up marginally on the week after the Fed announced . . . the same story as the last three meetings that they see inflation as transitory.
Gold miners, industrial metal miners, uranium names, steel companies all had a robust week. Tech (other than AMZN) didn’t fall hard, it just never got out of bed this week.
One thing that changed was the direction of the dollar. The dollar had broken out to new highs over the range of the prior three weeks during the week of July 19th and broke the one-year longer-term downtrend line. This week, the dollar had some bearish moves going on, helping commodities generally. The dollar quickly reversed all of the strength we had seen and made new one-month lows. The PPO is just above zero in positive territory and the cycle lines suggest a big move up is ahead for the dollar. The real question is whether the big trend defined by the cycle is still on, or if the dollar is going to continue going lower this week.
Oil companies are out of sync with crude oil right now. They must be listening to Jim Cramer who called a top in oil as it plummeted to $65. Now crude is back with a $74 handle. President Biden and Dr. Fauci are both suggesting they might have to implement some new mask mandates, but no one is talking about shutting anything down. I am struggling with why oil should be lower.
I did put two charts in the newsletter about China. It’s early, but news is changing there. Will this impact global trade?
Summary: Gold’s been on a decline from the highs exactly one year ago this week. Gold started to bounce. The miners and commodity-based industries look like they are turning up. Is this another rotation away from tech and into the interest sensitive trades? It’s still important to be cautious with capital and the SSI’s are not racing higher. Much like mom with the two fawns, sometimes it’s better to sit down and do nothing. Maybe some commodity related trades?
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Tech-Week-Frustration-July-31-2021
The markets sudden bounce at the 50 DMA on the SPX was more than I expected, and it was a big bounce, which surprised me. Technology names literally soared. SNAP was up 30%, Moderna up 22%. ROKU up 18% to be close to a breakout. The large cap names ripped higher. I have the charts of Alphabet and Facebook in the newsletter. They looked like they were part of the blue origin capsule, rocketing higher.
A few commodities had big bullish pushes. Natural Gas broke a 15-year downtrend and Lumber bounced after being chain-sawed 29% last week. Lithium and rare earths migrated higher, but it is a disparate group with some of the names not participating at all.
The dollar has some bullish signals going on, weighing on commodities generally. The dollar broke out to new highs over the range of the last three weeks and broke the longer-term downtrend line. The PPO has moved into positive territory and the cycle lines suggest a big move ahead for the dollar. I’ll cover more on this on the monthly conference call.
Here are the details:
Dwight and I will host the August Conference Call on July 29th. Click on the link to join at 5 PM EDT, Thursday. Password = energy
An abundance of oil names will report this week. We continue to have oil inventory data coming in shorter than expectations, but the oil names haven’t responded. We’ll see if the big test of support for crude oil down to $65 was enough and now we pump the next leg higher.
Summary: Technology names dominated the tape this week. Consumer discretionary also did well. It is the period to be lining up for the second half surge in retail. With a huge number of companies reporting this week, we’ll see what is going on and the optimism for the 3rd quarter should still be there. The noise in the trading room this week won’t be about the Seattle Kraken hockey draft, it will be the Federal Reserve meeting.
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Green-Eggs-And-Ham-July-24-2021
Stocks ended the week higher, rebounding from a sell-off on Monday. The advance was narrow, however, with much of the gains concentrated in technology and internet-related giants (ie. FANG stocks).
The initiation thrust of July 9th, turned out to be a dud. The market sold off Thursday and Friday. While the percentage down was relatively small, the damage under the indexes was very obvious. After JPM reported on Tuesday, not much positive happened. We migrated lower and even the large caps started to be sold.
The dollar is at a key inflection point. It has not broken out yet, but it is definitely impacting the commodity trade broadly. I covered commodities on the video, but not as much in this newsletter. The commodities look challenged at best, and as I look at rest of the market crumbling, I just want to turtle away and protect capital. For those interested, three sectors have rising PPO’s on the daily charts. Utilities, Consumer Staples and Real Estate. All the rest gave sell signals in the last few weeks. The SPX gave a PPO sell signal on Friday as well. With negative divergences everywhere, hunkering down for a few weeks looks like the course of action.
The dollar didn’t go anywhere it hasn’t been in the past few weeks, but it closed at the top of the price range, rising from the bottom of last week’s price bar.
The big banks couldn’t find buyers showing up for work on their earnings results. I locked in some profits on tech and some energy. I continue to be amazed at the selling in energy stocks, but I really don’t need to ride them all the way down. I’ll just buy them when they turn back up. For now, holding cash appears prudent.
Summary: The SPX index had new closing highs on Monday and new intraday highs Tuesday and Wednesday. Outside the big index, selling was abundant. The Nasdaq 100 60-minute chart finally broke its’ uptrend. Commodities look questionable, and with so many sectors giving PPO sell signals, it looks like a good time to roll away from this rally based on my indicators.
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Grizzly-Outlook-July-17-2021
The major indexes finished lower, but the S&P 500 Index and the Nasdaq did reach new intraday highs at midweek before falling back.
The indexes bounced up and down this week alternating days. Ultimately, we finished on the highs. In the breadth work on the video, I mentioned there was an initiation thrust suggesting renewed enthusiasm on Friday.
The dollar is at a key inflection point. It would appear to me to be trying to roll over lower. That would be my bias, but it has not broken down yet. It is trying to break trend line resistance to the upside. If that stalls and reverses lower, I expect a big resurgence into the commodity related trades. Stay tuned on oil, industrial metals, gold, silver, rare earths, and lithium as examples.
The dollar seems to be a light switch here, with lots of trades pivoting around it currently. It traded in the same range as last week for the most part. A declining dollar seems to help the $SPX stock market rally easily, whereas a rising dollar gives us a slower, more laboring rise.
The big banks start the heavy reporting season this week. The financial charts look ready to turn back higher, so that could be the interesting sector for the week.
Summary: The indexes are continuing to hit new highs. The wobble this week was a small problem, but we bounced back down on the Put/Call ratio as it was hitting a level where most market turns higher start from. Interestingly, we hit the put/call ratio very close to new highs.
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Chopped-Summer-Salad-July-10-2021
The major benchmarks closed mixed, with large-caps and growth stocks outperforming for the second consecutive week.
Large-cap growth stocks lead the gains, with Technology and Health care leading the pack. Consumer discretionary stocks were also strong.
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ClearWater Market Commentary as of August 9, 2021
The major indices recorded gains for the week, helping the large-cap
benchmarks and the technology-heavy Nasdaq reach new highs.