T3’s Daily Recap Report: Mr. Market Is Still Flirting With Record Highs
1) Bears Get Grinded Out… Again!
US markets managed to score a small victory today in the face of shaky European markets and geopolitical troubles in Turkey and other areas.
The S&P 500 hit an intraday high of 2168.35, putting it less than one point away from making its sixth record high in as many days.
The index rose just 0.2% on the day, though there were several signs of positivity below the surface, with traders taking what I'd call “selective risk-on” posture.
We saw notable outperformance in biotechnology (XBI) and large-cap technology stocks, with Apple (AAPL) managing to crack the $100 mark for the first time since June 6.
High-yield (HYG) was also strong despite a drop in oil prices. In recent months, high-yield and oil have been tightly correlated because of oil's affect on high-yield energy bonds.
Semiconductor stocks were also very strong after Softbank announced it would acquire chip designer Arm Holdings (ARMH) for $32 billion.
However, with Netflix (NFLX) down huge this afternoon on its disappointing ugidance, we may see a turnaround in tech tomorrow.
2) A Step Back
With the market well past the Brexit and flirting with all-time highs, let's take a step back and look at how far we've come.
So far in 2016, we've seen a major flip-flop.
In 2015, the big winners were biotechnology (IBB) and select large-cap tech stocks, most notably the F.A.N.G. (FB, AMZN, NFLX, GOOGL) names, which rose an average of 77.5% last year.
This year, the leaders have been what I call the G.U.T.S. complex — Gold (GLD), Utilities (XLU),Treasuries (TLT), and Silver (SLV). The G.U.T.S. trade is up 26.2% this year after falling -8.9% last year.
Why the change?
Simple — the Fed got dovish, other central banks are stimulus crazy, and fears of a global slowdown are everywhere. That's given instruments that benefit from low rates a big boost.
Taking a look at the broader indices, the S&P is up 6.1%, while the Nasdaq is lagging, primarily due to a huge drop in biotechnology.
However, all US indices are significantly outperforming Europe.
The Euro Stoxx 50 Index is down -9.7%, though to be fair, it's nearly recovered its post-Brexit losses!
3) A Warning in the Russell 2000?
This morning, Jeff Cooper of the Daily Market Report discussed the lagging action in the Russell 2000, which may be a hint of trouble to come:
This morning's report walks through another V Bottom by virtue of a Central Bank Slingshot following the Brexit Break, propelling a blow-off in the SPX and DJIA.
However secondary, indices such as the RUT suggests risk is hiding out in the larger cap SPX.
Moreover, a big SPX time/price square-out is on the table going into a potentially important low to high to high cycle with this week also being an important anniversary.
Click here to learn more about Jeff's Daily Market Report.
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