Jim’s Notes – Consumer Sentiment Falls

Moving the Market – June 13th

The markets closed the week on a flat note as the indices were unchanged. The University of Michigan Consumer Sentiment Index missed big. For June it was 65.6 versus 73.0 expected. That was a seven-month low and caught many by surprise. Maybe they should have called the President and he could explain to them how good things really are. The NASDAQ, QQQ, SOXX, and SPY moved higher for the week as the data points from CPI, PPI, and the FOMC fell in line with the hope and speculation that the Fed will cut rates soon. The consumer sentiment data shows that ‘real people’ are feeling the ‘real’ effects of inflation. At some point, the politicians and the Fed will grasp the reality of the runaway prices. The dollar was higher, interest rates dipped lower to 4.21%, and the NASDAQ closed at a new high. The move higher remains a narrow move by sector and by stock. It continues to be a stock pickers market. The big names continue to lead with AVGO, ADBE, CRWD, and NVDA leading the week. Technology was the leading sector up 5.6% for the week. It is important to note that only 3 sectors closed the week in positive territory, yet the NASDAQ was up 3.2% for the week. If the upside trend is going to continue, we need to see more breadth in the move. Up next week is more economic data with retail sales and housing data. The goal is to manage what the market gives and understand the risk level is rising relative to the fundamental data. Enjoy your weekend.

The major indexes closed the day flat as technology led what upside there was. The volume was below average as the major indices closed mixed on the day. The activity gapped lower to start the day but managed to close near even. Friday the NASDAQ closed up 0.1%, DIA was down 0.1%, and the SP500 was down 0.04%. Overall mixed activity on the day. The SOXX was down 0.3%. Small Caps (Russell 2000) were down 1.5%. The ten-year treasury yield was 4.21% down 2 bps and TLT was up 0.8% for the day. Crude Oil (USO) was up 0.4%. (UGA) was down 0.3%. Natural gas (UNG) was down 1.2%. The dollar was up 0.4%. Plenty to deal with moving forward as we manage our money and emotions relative to the current environment.

Monday Outlook: Consumer sentiment was well below expectations and set a negative tone for Friday. As we start a new week of trading the focus will be on the breadth of the movement. The question is how this unfolds. Do the mega caps continue to move high? Do we get more clarity relative to the drivers expanding beyond the news of the day and what the Fed will do or not do? The key factors of interest heading into the new week are 1) The dollar’s response to the data. 2) Interest rates moved to 4.21% with TLT at a new high near term. 3) Crude oil bounced back to $77 resistance on USO… what is the catalyst for more upside? 4) Natural gas remains volatile down 7.8% in the last three days. 5) DBA is showing some volatility as well in the consolidation pattern but trending higher. 6) Mega caps leading… rewarding the leaders. Do the laggards move higher? 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. Technology sector is the only one to outperform the index…

Headlines Worthy of Note:

Netflix stock rises as streaming video service draws more viewers. NFLX was up 2.4% on Friday in response to higher subscriber engagement.

Shopify was upgraded to an outperform after falling 17% in May. A look at the charts show a bottoming pattern breaking out at $63.21. It has filled the gap left by the move lower following poor earnings in May.

Tesla shareholders give Elon Musk his record payday. The stock gapped higher initially but gave back some fo the gains prior to the close. Worth watching this as many believe it will be back in the courts as shareholders sue again. Either way, there will be opportunities in the stock.

Quote of the Day: “The secrets of success are a good wife and a steady job. My wife told me.” — Howard Nemerov.

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