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Morning Commentary

WHOLE LOTTA SHAKIN 'GOIN’ ON   

By Charles Payne, CEO & Principal Analyst
7/7/2021 9:47 AM

I was encouraged by the market’s ability to climb off the canvas yesterday. While the NASDAQ Composite was the only major equity index to finish higher, suddenly, the S&P 500 is the best performer of the year.

Without a doubt, the (positive) stock of the day was Amazon (AMZN).  Shares of the company were already higher, as Andy Jassy began his first day as the company’s CEO, when the news broke that the Pentagon canceled the $10 billion JEDI cloud-computing contract initially awarded to Microsoft (MSFT).

Apparently, the companies will split the contract. For all the complaining about the performance of Amazon’s stock this year, it’s done pretty well and serves as a reminder why there are simply some stocks you should hold and not relegate to a silly year-to-date time frame.  

Amazon shares were on fire for a long time before stalling and essentially being trapped in a range for more than a year. It is a true classic breakout – with the stock creating a breakaway gap. Coupled with Apple (AAPL), these two stocks could do a lot of heavy lifting.

Where’s the Pose?

According to Sentimen Trader, the NASDAQ has closed at a 52-week high, 1,080 times since 1984, including yesterday’s session.

On those days, an average of 50% of stocks on the day the record is achieved are advancers.  Yesterday, only 31% of stocks in the exchange advanced. That is the lowest out of all those 1,080 days.

Moreover, only 41% of the NASDAQ Composite components closed above their 10-, 50- and 200-day moving averages. That is the lowest percentage for any day when the NASDAQ closed at a new 52-week high yesterday.

Something has to give as the quality of the rally continues to deteriorate.

S&P 500 Heat Map

All eleven sectors were lower at one point in the session, but four edged higher into the close.

Russell 2000

I’m tempted to ask what’s going on with the Russell 2000.  But I don’t see anything wrong with it other than the need for a spark when I look at the chart. But it’s holding up well.

The Reflation Trade Losing Altitude

The so-called reflation trade looks like it’s in trouble…at least for now. The biggest losers in the session:

Oil stocks, Airlines, Cruise ship operators, Retailers, and Banks took it on the chin.

Wall Street pounded the table on cyclical stocks and told everyone to load up in value and dump growth because this was more than a trade. This investment was going to be a glorious ride across the ocean to the island of prosperity.

After dumping the hottest stocks of the rally, many are wondering if sharks are circling their portfolio.

Message of the Market

It’s all about the big dawgs that carried the NASDAQ over the finish line and masked what was otherwise a tough session. Market breadth on the NYSE and the NASDAQ was demoralizing, and down volume dwarfed up volume more than 3:1 one on the New York Stock Exchange.

Market breadth hasn’t been nearly as robust as the market, which sent a series of new records heading into the second half of the year.

Market Breadth

NYSE

NASDAQ

Advancing

1,175

1,367

Declining

2,151

3,023

52 Week High

186

125

52 Week Low

26

75

Up Volume

841.95M

2.03B

Down Volume

3.29B

2.28B

Flattening yield curve

Back in 2019, the flattening yield curve was all the rage. Back then, it even slipped into negative territory with the help of the coronavirus; its uncanny ability to predict recessions remained intact.

Portfolio Approach

We took profits in Financials yesterday and are adding to Technology this morning in our Hotline Model Portfolio.

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Today's Session

The markets are in the green this morning, although the Dow and S&P500 are off the highs in the pre-market.  The 10 year treasury has fallen back to 1.30%.  Lower rates are good for growth and tech stocks. 

Ransomware attacks are on the rise, with the last grab demand of $70 million.  President Biden is holding a conference to discuss these attacks.


Comments
thank you Charles

jhpond on 7/7/2021 5:36:27 PM
 

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