Jim’s Notes – Modest Upside to Start the Week

Moving the Market – July 8th

The markets were higher on Monday as we start a week of data and earnings. The leading sector was once again technology but SOXX led the move higher. Small caps finally showed some signs of life but failed to hold most of the gains from early trading. Commodities took a break as the dollar moved higher. Overall it was a quiet day with average volume. Elections were the primary headlines as France shifts from the far right leading to a mixed bag that assures little will change. The democrats are scrambling to determine if Biden is fit to run again. Shows how ugly politics really are. Tuesday will bring testimony to Congress from Powell and friends. That should provide a good napping opportunity. I’ll read the cliff notes later. Bank earnings start on Friday with BK, C, JPM, and WFC releasing data before the market opening. Thursday is CPI data and Friday will be PPI sure to offer some guidance as it relates to inflation and the Fed. Going to be a week of grinding so be patient as it all unfolds and manage the risk presented.

The major indexes closed higher on the day with SOXX leading the day. Five of the eleven sectors were higher on the day. The activity started higher and then traded lower through lunch and sideways to the close. Monday the NASDAQ closed up 0.2%, DIA was down 0.06%, and the SP500 was up 0.1%. The SOXX was up 1.9%. Small Caps (Russell 2000) were up 0.7%. The ten-year treasury yield was 4.27% flat and TLT was up 0.2% for the day. Crude Oil (USO) was down 1.1%. (UGA) was down 1.3%. Natural gas (UNG) was up 1.6%. The dollar was up 0.1%. Plenty to deal with moving forward as we manage our money and emotions relative to the current environment.

Tuesday Outlook: The markets are back to the previous pattern of leadership… technology leading the upside with consumer discretionary pitching in. The markets drifted to new closing highs. The breadth remains challenged. Small caps were slightly higher along with midcaps. Very tight action on Monday as we let things unfold. Watching how the parts look relative to the whole. What are we watching? 1) The dollar directional shift. 2) Interest rates at 4.27% and still showing volatility relative to the outlook. 3) Crude oil remains above $80… some testing the last two days. 4) Natural gas remains volatile breaking below the key support levels.

The chart below shows the breadth issue for the SP500 sectors compared from the beginning of the current leg higher that started in April. The technology sector is the only one to outperform the index… Note the rise in XLY last week.

Headlines Worthy of Note:

Inflation outrage from customers in shifting the consumer landscape. The rise in customers voicing their opinions relative to price increases as some feel they’re unjustified. This could and should disrupt the consumer sector offering opportunities to those who can capitalize on the angst.

Make for break week for the President… Stifel sees 40% chance of Biden dropping out of the race. Pressure from donors and the democratic party overall is building for the President to resign from the election in November. How quickly things change.

Semiconductors move higher after a pause on Friday. INTC broke from the bottoming range leading the sector. AMD added 3.9% to the break higher on Friday from the consolidation pattern. AVGO rallied 2.5% after Friday’s slump. NVDA up 1.8% and still looking for things to break higher.

Quote of the Day: “People only see what they are prepared to see.” — Ralph Waldo Emerson.

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