Last week, Max Wiethe from Real Vision and I sat down for about an hour to discuss a myriad of timely and relevant market topics. (See the link at the end of the commentary).
So much happened in this past week. The short list:
- Blow-out Earnings of Apple (AAPL), Alphabet Inc. (GOOGL), Facebook (FB) and Amazon (AMZN)
- Apple announces a 4:1 stock split
- The Fed Meeting
- The Anti-trust Committee Meeting
- Trump blocks TikTok
- Trump threatens to delay the November Election
- The politics of how much more stimulus our House and Senate will dole out
- The controversy around Kodak.
Ok, I said short list. There is way more.
However, the point is, besides remaining extremely bullish on gold and silver, the junk bonds and Economic Modern Family continue to serve as our best guide for market price - which, in the end, is the only thing that matters.
To review, last week I wrote about junk bonds and the correlation of risk-on and market action. JNK closed on new multi-month highs. I also wrote about the Gold to S&P 500 ratio. Gold is still well underperforming the SPY, which suggests you ain't seen nothin' yet for the metal.
While the picture remains mixed for the Economic Modern Family, the charts are predominately positive. Retail (XRT) closed on new 2020 highs. Led by e-commerce and a boost in retail spending, this is perhaps the best sign I see concerning hope going forward for the economy.
The Russell 2000 (IWM), in spite of the rising jobless claims and the worst GDP number since the 1940's, hung tough. IWM closed right on the 50-WMA (blue) and below the 200-WMA (green).
Biotechnology (IBB) took a breather, partly because of Gilead's (GILD) poor earnings. Nevertheless, the overall breakout from 126-130 should be support.
Regional Banks (KRE) had an inside week. That makes total sense as the weakest link, Prodigal, is still unsure whether he wants to join the party or spoil the fun. A break above 39.30-39.50 could trap a lot of shorts.
Transportation (IYT) got steam late Friday after news that Kansas City Southern Railroad could be of interest for a takeover bid by private equity investors. Now, IYT has its biggest hurdle over 180.
Semiconductors (SMH) reached the top of the weekly channel you see in black. This is a chartist's dream. Through 168-170, close your eyes and buy as tech has more upside. On the other hand, should SMH back away from the channel and break below 160, that's a clean failure.
When we look at the Family as a whole, we see investor sentiment. Retail and tech are where the bulk of money is going. Biotech should continue to shine, while small caps, transportation are alive on hope of more stimulus. Banks are the key to watch as they could see money rotation if this week begins well.
Latest news flash, folks in India are rushing to borrow money from banks in exchange for their gold jewelry. Indian households are sitting on a $1.5 trillion hoard of gold. Could this start a trend elsewhere where banks and financial firms use demand to draw new customers?
Stay tuned as the summer road trip takes many twists and turns!
Link: Real Vision's "A Summer Road Trip Across Markets" 07-29-20. With picks!
- S&P 500 (SPY): 323 now pivotal support, 332.58 a gap to fill
- Russell 2000 (IWM): Held the 200-WMA and now has 150 resistance
- Dow (DIA): 270 resistance, 262.50 support
- Nasdaq (QQQ): 262 support and 270 resistance
- KRE (Regional Banks): Confirmed bearish phase. When it goes up and down the 50-DMA a lot, something big is coming
- SMH (Semiconductors): 165-168 pivotal
- IYT (Transportation): 172.55 support, 179-180 resistance
- IBB (Biotechnology): 142 resistance, 136 support
- XRT (Retail): Looks like Granny wants 50.00 (or to be 50 again!)
- Volatility Index (VXX): 27.82 the 200-DMA
- Junk Bonds (JNK): Risk appetite on
- LQD (iShs iBoxx High-Yield Bonds): 137.50 support
Director of Trading Research and Education