Jim’s Notes – Market Bounce Back

Moving the Market – May 25th Weekend Update & Outlook

The markets attempted to erase the selling from Thursday but we ended with an inside day on the chart technically. This will set the stage for the final week of the month. Driving the action for the week was semiconductors with NVDA earnings as an upside catalyst for the sector. In turn, that made the NASDAQ the leading index. The most interesting stat to me was the S&P 500 index showing only technology in positive territory of the eleven sectors. The Dow was down 2.3% for the week. It was a bumpy ride without a lot of positive takeaways as the Fed minutes didn’t settle well with investors. The inflationary cycle isn’t going away anytime soon despite the banter from the White House and the talking heads on CNBC. Throw in growth from the PMI data and you get some selling which we saw on Thursday. The biggest laggards on the week were IYT, IYR, and XLE. The most worrisome is IYT closing at the 200-day MA. Transports should move higher if the economy is growing as suggested by the PMI. Definitely something we will be watching looking forward. Commodities remain sluggish near term, but still like the longer term outlook. Interest rates while off their highs are still elevated and as a cause for concern relative to the markets. The dollar held support and watching the Fed influence. Crude oil showed a larger-than-expected build in inventory keeping it near the $78 per barrel level. Next week is the end of the trading month with more housing data, consumer confidence, GDP, personal income and spending, PCE index, and plenty of Fed talk with five presidents out speaking. Technically the charts remain in a current uptrend with some topping/consolidation the last seven trading days. With the Fed in control near term we will remain cautious and manage the risk that is. Enjoy the long weekend.

The major indexes closed the day higher with semiconductors setting the upside tone. The focus was on inflation pressure easing globally. Leadership came from the losers on Thursday consumer discretionary, utilities, and small caps. The focus will now shift to more inflation and economic data next week. Monday markets are closed for the Memorial Day weekend. The NASDAQ closed up 1.1%, DIA was up 0.01%, and the SP500 was up 0.7%. The major indexes closed higher on the day. The SOXX was up 1.9%. Small Caps (Russell 2000) were up 1.1%. The ten-year treasury yield was 4.46% down 1 bps for the day. Crude Oil (USO) was up 1.2%. (UGA) was up 0.6%. Natural gas (UNG) was down 5.4%. The dollar was down 0.3%. Plenty to deal with moving forward as we manage our money and emotions relative to the current environment.

Tuesday Outlook: Broad indexes remain near their respective highs. The focus is clearly on the Fed and interest rates. Growth is still a big question mark with the exception of AI technology. Semiconductors continue to be the big benefactor but it is widening into software and other ancillary sectors. The laggards bounced back on Friday and we will look for a follow-through to the move. XLF sold on higher interest rates for longer talks, watching how they follow through. GLD dumped lower and holding at support. Remember the facts will eventually matter until then, you follow the trend. 1) Watching the dollar, does it bounce back from recent selling? 2) Interest rates, do they rise back to the previous highs. 3) Crude oil fell on supply data? How does that unfold? Modest bounce on Friday… continue?4) Natural gas is up 40+% the last three weeks… down 5% Friday does that continue? 5) DBA was up the last five days to bounce off the lows. 6) Patience as the answers unfold… take what is offered up or down.

Charts to Watch: See Notes on “Reality of the Markets”

Headlines Worthy of Note:

Apple and OpenAI team up in expected AI debut. The expected launch is expected June 10th. It will be interesting to see the impact both short and long-term on the stock.

Robotics continue to grow in use across industries. Google is investing $350 million in India’s Flipkart. UBOT ETF is one way to track and leverage the investment space. IBOT is the unleveraged version of the sector.

A fun way to celebrate Memorial Day – Cocktails to kick off the summer season.

Quote of the Day: “You must be the change you wish to see in the world.” — Mahatma Gandhi.

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