Monday was nip-and-tuck all session long, then the market caught a bid and rallied into the close just like it did on Friday. I’m not sure what that’s all about. I suspect some deep-pocketed folks want to get  long, big-time,  before the Federal Open Market Committee (FOMC) announcement tomorrow.

Market breadth on the NYSE and the NASDAQ Composite was just about even except for volume, which was decidedly more bullish on the latter.

Market Breadth	NYSE	NASDAQ
Advancing	1,529	2,072
Declining	1,817	2,257
52 Week High	272	222
52 Week Low	12	22
Up Volume	1.63B	2.58B
Down Volume	2.57B	1.77B

S&P 500

On the other hand, market breadth on the S&P 500 was decidedly bearish, with big Technology doing the heavy lifting. It’s weird because it’s not just the growth versus value proposition – I think these names have become de facto safe havens for those investors with paper hands and laser-eyes dreams.

Consequently, Technology and Communication Services were able to pull the S&P 500 across the positive line right before the closing bell.

S&P 500 Index	+0.18%
Communication Services XLC	+0.66%
Consumer Discretionary XLY	+0.01%
Consumer Staples XLP		-0.06%
Energy XLE		-0.47%
Financials XLF		-1.07%
Health Care XLV	+0.09%
Industrials XLI		-0.45%
Materials XLB		-1.23%
Real Estate XLRE	+0.57%
Technology XLK	+1.01%
Utilities XLU	+0.21%

The Rolling Thunder Tour

I'm rolling thunder, pouring rain
I'm coming on like a hurricane
My lightning's flashing across the sky
You're only young, but you're gonna die

-Hells Bells

So, you keep waiting for a pullback as your signal to get in the market, and now you are becoming antsy because the market is sloppy but still making new highs. Here’s the rub, kid: every sector has had a 5% + pullback this year. A couple of sectors have pulled it off twice.

I’m calling it the ‘Rolling Thunder Pullback Tour’ as it hits a sector, wreaks havoc, then moves on.

Communication Services (XLC)

• Mar 17^th to Mar 26^th -5.2%

Consumer Discretionary (XLY)

• Feb 8^th to Mar 9^th -9.8%, and Apr 16^th to May 12^th -7.2%

Consumer Staples (XLP)

• Dec 31^st to Mar 4^th -6.0%

Energy (XLE)

• Mar 12^th to Apr 22^nd -13.0%

Materials (XLB)

• Jan 12^th to Jan 25^th -5.6%

Real Estate (XLRE)

• Feb 24^th to Mar 4^th -7.7%

Technology (XLK)

• Feb 12^th to Mar 8^th -9.4%, and Apr 26^th to May 12^th -8.4%

Utilities (XLU)

• Jan 25^th to Feb 26^th -9.4%

Moral of The Story?

For those that invest and use automatic stop losses, the profit loss (P/L) could be littered with more losers than winners, even as the market is at an all-time high. It also augurs for taking profits, and at the same time, it is a reminder of how important it is to know and adhere to fundamentals before the crowds. Make sure you do not panic in this environment.

Inflation Scare Fading?

What the heck is influencing the 10-year yield?  Google?  Arbor Data Science released a chart yesterday showing the correlation between the ten-year yield and global consumer search activity.

Gold was coming on strong, and now, it’s beginning to stumble as well.

Today’s Session

Producer Price Index

Headline PPI climbed 6.6% year over year, which blew away consensus of 6.3%, while core climbed 5.3% and established an all-time record high.

Core PPI (ex food and energy) on month-to-month basis increased at a pace of 0.7% against consensus of 0.5%.

The PPI number gives those looking for a more aggressive Fed ammunition, and yet, at the same time, it has that climactic feeling of a top.

Industrial Metals Pulling Back

Meanwhile, in real time, key commodities have been retreating quickly.

Cooper

Lumber

Global Money Managers are overwhelmingly seeing inflation as transitory.

New York Fed Survey Customer Expectations

• 4.0% inflation expected over the next year is at an eight year high.
• 3.6% inflation expected over the next three years.

Deeper Look at Inflation Expectations

It’s clear from the survey, those with stronger financial anchors, including education, see less inflation on the horizon than older folks and those with only high school diploma.

Age		Education		Income
<40	3.2	HS or less	5.6	Under $50K	4.0
40 to 59	4.0	Some College	4.1	$50K to $100K	4.5
>59	4.8	BA +	3.4	Over $100K	3.8

People are extremely confident they will remain employed one year from now.

Headline retail sales number was disappointing but there were huge revisions that lifted April from unchanged to +0.9%.

May Monthly Sales Retail & Food Services	M/M	Y/Y
Headline	-1.3	+28.1
Motor Vehicle & Parts	-3.7	+34.8
Furniture	-2.1	+66.6
Electronics	-3.4	+91.3
Building Materials	-5.9	+10.5
Food & Beverage (at home)	+1.0	+0.7
Health & Personal Care	+1.8	+25.6
Gas Stations	+0.7	+57.0
Clothing	+3.0	+200.3
Sporting Goods	-0.8	+44.1
General Merchandise	-3.3	+10.3
Internet	-0.8	+7.9
Food & Beverage (away from home)	+1.8	+70.

Obviously, there is a lot of data to comb through, but at first blush, I do not see this data changing planning at the Federal Reserve. 

With that said however, money is leaning back into value and holding off on growth for the moment, and that’s a switch from pre-open action prior to the onslaught of data.

As for the consumer, they are still flushed with cash, even as the stimmy checks runoff.  In addition, according to JPM Chase May card metrics:

• Loss 1.77% from 1.97%
• 30-day delinquency 0.69% from 0.78%

Portfolio Approach

Yesterday, we added to Industrial and closed a position in Consumer Discretionary in our Hotline Model Portfolio.

Comments

Only on Wstreet.com with Charles do you get this kind of in-depth info on what's happening in the financial markets here and abroad. That's Charles. He's making us money and helping us keep it! Lorin K on 6/15/2021 10:32:50 AM

5 % pullbacks this year ----- question ---XLI ? Thanks for your work. John Cowger on 6/16/2021 10:55:58 AM

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