EB Daily Market Report - Tuesday, July 5, 2022
Executive Market Summary
- Futures weakened overnight and our major indices all gapped lower
- The NASDAQ has been a solid relative performer, however, aiding today's reversal
- Crude oil ($WTIC, -8.39%) is down big as are most other commodities; gold ($GOLD, -1.94%) is looking to close at its lowest level of 2022
- Chevron Corp (CVX, -3.21%), one of the oil giants, is weighing heavily on the Dow Jones
- Energy (XLE, -4.55%) is very weak due to the drop in crude oil
- Utilities (XLU, -3.49%) and materials (XLB, -2.40%) are also having rough sessions
- Meanwhile, communication services (XLC, +2.13%), consumer discretionary (XLY, +2.08%), and technology (XLK, +1.01%) are the only 3 sectors in positive territory
- Etsy (ETSY, +10.26%) is having another HUGE day to lead the S&P 500 higher
Market Outlook
What happened to inflation? Gold ($GOLD) hit its lowest level since December 2021. Crude oil ($WTIC), at its current level, would represent its lowest close since April 25th. The 10-year treasury yield ($TNX) is tumbling 8 more basis points to 2.81%. If Wall Street is worried about inflation, you wouldn't know it from these three. No, Wall Street has moved onto recession now. Inflation talk will begin to die down, and recession talk will take over. I discussed that likely scenario months ago and now it's coming to fruition. How many GREAT stories have you read about the falling treasury yields? There won't be many, I can promise you. Good news doesn't sell.
Recession talk will turn into deflation talk soon. I give it til the 4th quarter. Rates will fall back and the Fed will turn dovish. Growth stocks will soar. I've been showing you the rotation taking place under the surface of the S&P 500. Today the rotation was on steroids in the early going. Check this chart out:
Our major indices opened lower, but Wall Street used the opportunity to purchase more aggressive stocks and it clearly shows in the 3 "sustainability" ratios featured beneath the S&P 500. It's just one day, but it's another bullish day.
Sector/Industry Focus
I love the action in internet stocks ($DJUSNS) today. After printing lower lows with a much higher PPO reading (positive divergence), the group is surging 4% today to clear its 20-day EMA:
ChartLists/Strategies
Many growth stocks are acting more and more like the selling is behind them. Braze (BRZE), a software company ($DJUSSW), has moved to a 4-month relative high vs. its industry peers and it's hard not to like the successful 20-day EMA test:
I suspect that we'll see more and more aggressive growth stocks begin acting like BRZE.
Earnings Reports
Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include several companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.
Tuesday, July 5:
None
Wednesday, July 6:
SLP
Economic Reports
May factory orders: +1.6% (actual) vs. +0.5% (estimate)
Happy trading!
Tom