Jim’s Notes – Consumer & Financial Sectors Lead

Moving the Market – July 2nd

The markets started slower on the day but found some energy following Powell’s speech. The NASDAQ and SP500 moved to new closing highs but still not showing clear momentum to the upside. Albeit Tuesday was better. We will look for new positions as we manage the existing ones. The leadership Was broader with nine of the eleven sectors closing higher on the day. The NASDAQ picked up where it left off on Monday breaking above the mid-June peak and was led by TSLA and semiconductors on the day. XLY was the leading sector as the consumer sector renewed leadership and broke to new highs. The dollar was lower, interest rates were flat at 4.43%, gold was flat, and crude oil took a break from the move higher. The downside was led by XLV. Banks bounced again as the sector tried to move higher. Watching money flow for clues where investors are willing to put money to work. Small caps (IWM) were slightly higher and remained in a solid pattern should the upside gain momentum. Overall positive day for the broad markets as we watch for a continuation of the upside move. Manage your risk accordingly.

The major indexes closed higher on the day with sectors showing stronger trading. The volume was above average with VIX dipping lower. The activity started slow but the buyers stepped in to push the indexes into positive territory. Tuesday the NASDAQ closed up 0.8%, DIA was up 0.4%, and the SP500 was up 0.6%. The SOXX was down 0.01%. Small Caps (Russell 2000) were down 0.8%. The ten-year treasury yield was 4.43% up 9 bps and TLT was up 0.6% for the day. Crude Oil (USO) was down 0.5%. (UGA) was down 0.2%. Natural gas (UNG) was down 0.9%. The dollar was down 0.1%. Plenty to deal with moving forward as we manage our money and emotions relative to the current environment.

Wednesday Outlook: The markets are back to the previous pattern of leadership… technology leading the upside with consumer discretionary pitching in. The markets push to new closing highs. The breadth broadened on Tuesday… can it continue? Small caps were slightly higher along with midcaps. They are in a solid pattern and looking for a break higher from both sectors. Watching how the parts look relative to the whole. What are we watching today? 1) The dollar moving higher. 2) Interest rates at 4.43% and still showing volatility and testing the May lows. 3) Crude oil remains above $80… The break higher is a concern for inflation data and the consumer. 4) Natural gas remains volatile breaking below the key support levels. 5) Watching breakout from… USO, DBC, FANG, XME, and IGV for the upside. The downside is UNG, TLT, and XLV. The reversal from DBA, TLT, and DPST. Taking what is offered and balancing the risk.

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 telecom last week.

Headlines Worthy of Note:

The US needs more Tungsten and China controls 80% of the supply chain. Of course, the Biden administration raised tariffs on imports of tungsten in May. Another commodity worthy of tracking. Nvidia and Taiwan Semiconductor use them in making chips.

China’s BYD is set to take Tesla’s crown as the number one EV battery producer. BYDDY has moved up 35% from the February low.

Tesla stock jumped as sales slid, but they were better than expected. TSLA was 10.2% on Tuesday and 16.8% on the last two days.

Quote of the Day: “It has been my experience that folks who have no vices have very few virtues.” — Abraham Lincoln.

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