The mkt waffled on Friday with the Dow up 24, S&P up 0.69 while the Nasdaq lost 13 and the Russell gave back 3 pts. For the week – The Nasdaq suffered the most as traders/investors continue to use tech stocks as a source of cash as they reallocate resources. All 4 of these indexes continue to HOLD above their short term supports - which signals that the mkt remains 'ok'.....(but still feels a bit tenuous)......If we see them test or break at support - that will be the catalyst for a broader pullback. Levels to watch - INDU 20,932, SPX 2394. NASDAQ 6085 & RUSSELL 1388.
Friday’s macro data was another disappointment in a string of weaker economic numbers of late. The Commerce Dep’t reported that housing starts plunged by 5.5% for May, - in a time when housing starts should be ramping up. This decline caught the mkt and the many economists/strategists by surprise……most of these guys have been projecting an increase of 4% not a decrease of 5.5%. To add insult to injury – they also reported that building permits fell by 4.9%. …….building permits reflect FUTURE activity – combine that with a drop in housing starts and it suggests that new housing construction is set for a pullback – and that correlates strongly with an economy that is under pressure. But even after all that – the weak macro report did little to cause broad concern (for now).
Look – the eco data for the last couple of months has shown weakness – yet stocks are trading closer to all-time highs – and any time there has been a pullback – it has given investors a reason to ‘buy the dip’ – because we keep being told how great the economy is doing overall. They keep accentuating any of the positives while eliminating any of the negatives – and while that is a good mantra for your life – it raises the caution flag when it comes to trading/investing. And with the eco data weakening while prices keep rising – the mkt gets more expensive with each passing day.
Then on Wednesday – Janet Yellen confirmed what we all knew – rates rose by another 25 bps and the FED was going to begin the process of shrinking the balance sheet – never mind that inflation and other eco data is weakening and investors/traders found a reason to take the mkt higher. The 10 year treasury yield slipped to 2.15% as investors move money back into the bond mkt… - a complete disconnect if you believe that rates will continue to rise this year. I mean look – she did say that we should expect another hike in 2017 as well as expect her to begin to shrink the balance sheet – if the mkt really believed her and really believed the hype – then that is not what should be happening at all. We should be seeing yields go UP and we should also be seeing money come of Utilities as investors clamor for more exciting investments.....
For the week - Industrials, Energy, Financials, Healthcare and Utilities were the best performers while Consumer Staples and Tech came under pressure. In the end – investors should remain focused on fundamentals and valuations – paring back on holdings that have so outperformed and reallocating that money into sectors that have underperformed and are set to play ‘catch up’. Traders will continue to trade the idea du jour.
Retailers got whacked on Friday after the news hit the tape that Amazon was buying Whole Foods…..in at $13.7 bil deal…..Grocery stores, which have been under pressure already, got hit again as analysts/strategists suggested that this merger will only pressure to the sector…..Sean Lynch – Co Head of Global Equities for Wells Fargo had this to say:
“This is a shot across the bow – the worry is that Amazon going to impact the market, drive margins down”
Well - it’s not like this hasn’t happened before! We have seen what Amazon did to the bookstores…..how they have changed the way people shop, and now – they are going to change the way we buy our groceries…Consumer Staples (XLP) gapped DOWN on the opening and struggled all day to hold onto support at $55.67. If this was just a one day move then look for the XLP to fill the gap created by this news. If it fails to hold then intermediate support is at $55.
US futures are UP 7 pts in early trading.. following a quiet weekend of no economic or political surprises in Europe. No eco data today...but there are two FED speakers - NY's Dudley at 8 am and Philly's Evans at 7 pm. It looks like the mkt wants to re-test the recent highs at 2445 ish....and if nothing changes it will do so right around the open. Again - I would look for it to fail as there seems to be plenty of supply at that level.
OIL is up 0.20 cts at $44.94 as she struggles to hold on here.....and Gold is down $5 at $1251/oz - churning at both intermediate and long term support at $1250. A break here will see gold test the May lows of $1220/oz.
Global mkts are all higher. In Europe - UK Brexit Secretary David Davis is on his way to Brussels to begin divorce proceedings - investors will be paying close attention to this after PM Theresa May's recent losses in the election. FTSE +0.51%, CAC 40 + 0.9%, DAX + 0.86%, EUROSTOXX + 0.94%, SPAIN + 0.24% and ITALY +0.83%.
Take Good Care
Simple Summer Striped Bass
4 Filets of Striped Bass w/skin on, Olive oil, Freshly squeezed lemon juice, oregano, smashed garlic cloves, s&p, fresh chives, cut into 1 inch for garnish.
Combine oil, lemon juice, oregano, garlic, and pepper in a large shallow bowl. Add fish to marinade, and flip to coat both sides. Cover with saran wrap, and place in the refrigerator 45 minutes.
Heat the grill – to med high. Take the striped bass out of the fridge and remove from the marinade, Place it on the grill, skin side down, and season with salt. Grill until skin is lightly browned and starting to crisp. Using a spatula - Carefully turn fillets and cook through until the center is opaque – no more than 5 to 6 minutes.
Serve with rice pilaf and sautéed spinach (garlic and oil, s&p).
Decorate with the chives and lemon wedges.
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