Snap Back

Quick Take: Sell Bias. Economic and pandemic uncertainty serve as a backdrop in an election year.  

Dear Market Player:

For the week, the Bull took a one-two hit as sellers took profits amid fears over the world’s health and finance concerns. 

The seemingly overdue selling sent the S&P 500 down -4.78% on institutional grade volume, and the Nasdaq down -2.3% on volume that favored the bulls by a modest margin. 

The week’s heaviest selling came Thursday on the heels of Fed Chairman Jerome Powell’s press conference where he stated raising interest rates wasn’t a consideration given the country’s  economic situation.

The Fed said it doesn’t see the economy returning to pre-pandemic levels until 2022. This year’s GDP may fall 6.5% and unemployment, not at about 13%, may recover to about 9% by the end of the year.  

A resurge in covid-19 cases in places such as Florida, Texas and Arizona reminded the country still has an invisible enemy to reckon with. 

Treasury Secretary Steve Mnuchin said a second quarantine was not an option, though a second round of stimulus checks may be.

A market awash in cash keeps the Bulls perky. They are reassured the Fed has their back as it expects the economy will continue to tick. 

Fund managers in June typically gravitate toward quality stocks as they add the winners to portfolios to impress clients. We’ve seen top dividend vehicles attract bids as bonds lose popularity with low yields. 

The Tech leaders pulled back with the broader market for the week, though still well above major moving averages . They continue to serve as strength in an economy that favors their “do it from home” offerings. FB, AAPL, AMZN, NFLX, GOOG and MSFT. 

New highs encourage from MICROSOFT (MSFT, +0.29%) chip standout Nvidia (NVDA, +0.14%) and eSports ETF (ESPO, +0.89%.) 

The US presidential election November will attract more attention from market pundits in the coming months. The corporate America’s tax structure will have an impact on its outcome. Look for polls as influence to buyers and sellers. 

Evidence of froth persists as low priced stocks have attracted bids, presumably from Robinhood type traders looking for an easy buck. This type of activity from the “lesser informed” has gone hand-in-hand with market tops before. 

NEXT WEEK

Tuesday: Earnings announcement from software maker Oracle (ORCL) and homebuilder Lennar (LEN.) 

Thursday: Earnings announcement from Kroger (KR.)

Friday: Earnings announcement from Carmax (KMX) AutoZone (AZO) and Tesla (TSLA.) 

TECHNICALLY SPEAKING

  • The S&P 500 closed just above its 200-day moving average for the week.
  • Two distribution days gave the Bear and edge for the week. 
  • All sectors posted losses.
  • The least weak were: Tech (XLK, -1.97%, Communications (XLC, -2.50%) and Consumer Staples (XLP, -3.81%)
  • Weakest were: Energy (XLE, -11.2%), Financial (XLF, -9.18%) and Materials (-8.01%)
  • NYSE Volume was 10% higher than last weak with a slightly bearish .8 Up/Dn ratio.
  • Nadaq Volume was 5% higher with a slightly bullish Up/Dn ratio of 1.  
  • The Advance Decline ratios were decidedly bearish with the NYSE at .2 and the Nasdaq at .4.

GROWTH STOCKS

Watch for recent breakouts falling apart. A handful of these happened last week.  This would serve as a caution for potential breakouts.

Homebuilders and REITs setting up in bases. Success here will bode well for the broader market.

Biotechs are holding their bullish patterns.

BREAOUTS

Adobe IncADBESoftware & IT Services
Autodesk IncADSKSoftware & IT Services
Biomarin Pharmaceutical IncBMRNPharmaceuticals
Datadog IncDDOGSoftware & IT Services
Fastly IncFSLYSoftware & IT Services
Livongo Health IncLVGOHealthcare Equipment & Supplies
Neurocrine Biosciences IncNBIXBiotechnology & Medical Research
Trade Desk IncTTDSoftware & IT Services

BASES

Adaptive Biotechnologies CorpADPTBiotechnology & Medical Research
American Homes 4 RentAMHResidential & Commercial REIT
Beyond Meat IncBYNDFood & Tobacco
D.R. Horton IncDHIHomebuilding & Construction Supplies
GSX Techedu IncGSXPersonal & Household Products & Services
Invitation Homes IncINVHResidential & Commercial REIT
ServiceNow IncNOWSoftware & IT Services
Paycom Software IncPAYCSoftware & IT Services
Pinterest IncPINSSoftware & IT Services
Peloton Interactive IncPTONLeisure Products
10X Genomics IncTXGHealthcare Equipment & Supplies

Coming IPO’s from online used car seller Vroom (VRM) and Peter Thiel’s data miner Palantir hope to attract the bids like the recent IPO electric pickup truck maker Nikola (NKLA.)  

Stay safe,

Dan