Climbing the wall of worry

S&P 500 was in a precarious position, but my key area of 5,265 to low 5,270s held Thursday, and I preferred long bias going into Friday. The key goods orders data came in above expectations, but not as hot as feared, therefore stocks ran with it – and I consider it essential that Nasdaq did lead, it bounced above the pre-NVDA earnings level while S&P 500 did not (yet). So, we have the bull upleg ingredient in place as much as a steep Nasdaq reversal that‘s not a function of just NVDA (or DELL).

Communications and consumer discretionaries did well while bonds do their best to climb the wall of worry of incoming data painting resilient economy ahead together with sticky inflation that‘s not going away. In this light, Friday‘s revision to consumer confidence and inflation expectations has been mostly positive for risk taking, therefore I say that the right sectors are leading (tech, tben all eyes on financials recovering from two Dimon cold water pronouncements (yeah, Friday too), and consumer discretionaries as such (it‘s not about AMZN just – see LULU, ANF, AEO, ELF, RL and even TGT having trouble declining).

The sectoral mix was right in that financial and industrials rose as well while defensives didn‘t crater – and once again, the lower volume or inside bar Friday isn‘t an issue - I‘m counting on tech, and of course NVDA and beyond to lead.

And what do I expect from next week‘s economic data?

Credit markets

The best things about this chart, is HYG relative outperformance. Break above Thursday‘s highs would be a gift to the stock market bulls who can then do the same.

Yields overall flash amber light, not red. For as long as rate hike(s) don‘t get factored in much into expectations, for as long as the Sep cut remains in the game (it‘s merely a coin toss now) and perceptions of inflation as getting off the ground while the economy doesn‘t slow down below soft landing expectations getting upset, stocks are fine – that‘s all the more true till Thursday.