July 18, 2022, 1:30 PM EDT

The market was limping along yesterday after investors learned the National Association of Home Builders (NAHB) confidence experienced its second-largest one-month plunge in history. Then came a story from Bloomberg that Apple (AAPL) will slow down its hiring and spending next year. I think what was more unnerving than the richest company in history is going on a spending diet is that it sees the need to do so next year.

Jobs Could Vanish

With all the media cheering the last jobs report, it has to be noted that there has already been a sharp drop-off in jobs, and Goldman Sachs (GS) sees this snowballing into a boulder. We are watching more people work two jobs and even more just simply sitting it out, which is still a marvel, considering the wage spiral.

Sector Performance

Three of eleven sectors finished in the green column, with much selling in defensive sectors.

The Heat Map was less flattering, with the Energy (XLE) sector enjoying the widest success.

Technical View

The S&P 500 came this close to clearing its 50-day moving average. That’s a key test, but the bigger test comes with filling that gap (see blue circle), and then pulling back to find support at the current resistance points.

Key Charts

XRT (Retailers)

Retailers were ready to surge higher. Yes, consumers are grasping for straws and their credit cards, and there is enough dry powder (credit card debt to the Gross Domestic Product (GDP) is very low right now). The SPDR S&P Retail ETF (XRT) big test begins at 66.

NASDAQ Composite

The NASDAQ Composite is threading its 50-day moving average and acts like it’s ready to move higher.  The first test comes at 11,750, and the breakout happens with a close above 12,250.

Homebuilders

There has been a very impressive stealth rally among homebuilders, even as the housing boom is clearly under strain. But the long-term trendline is in place, and there is a country mile before the iShares U.S. Home Construction ETF (ITB) breaks out (north of 62).

 

Portfolio Approach

There are no sector weighting changes this morning in our Hotline Model Portfolio.

Today’s Session

There was the usual move higher early this morning, which has become something of a Venus flytrap, as those strong starts fizzle fast. But today could be different.  Housing starts not only missed consensus, but it declined for the second month in a row – down significantly from April.  Yes, we are in the bad news = good news phase again.

The focus moves back to earnings with Netflix (NFLX) after the close.

I’m also watching the 10-year bond yield, which has edged back up to 3.00%.

And the dollar failed to breakout but needs to come in a lot more.

Comments

I'm not surprised that housing industry is crashing, the cost of building a house has increased far beyond the rate of inflation. I went to a plumbing supply store yesterday and the price of steel pipe fittings has more than doubled from 2 years ago. No wonder people are backing away. Jim on 7/19/2022 10:08:47 AM

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