Jul 26, 2021
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“When the facts change, I change my mind.” – John Maynard Keynes
Futures are lower to kick off the week, but it’s nothing like last Monday and we’re also well off the lows from earlier. It’s a slow start, but we have a busy week of economic data ahead as well as a ton of earnings reports, and don’t forget about the FOMC meeting on Wednesday.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, the latest US and international COVID trends including our vaccination trackers, and much more.
There’s an old sketch from Saturday Night Live called “Mr. Short Term Memory” where Tom Hanks plays a character with a disorder where he has a limited short-term memory. As you might expect, the segment made for a few laughs when the character was in various situations like visiting a friend in the hospital or as a contestant on a game show. Looking at the market last week, it appears as though Mr. Short Term Memory is a guiding force in the market. Just a week ago, Dow futures were already down more than 500 points and the yield on the 10-year US Treasury was plummeting on concerns of rising COVID cases from the Delta variant. By Tuesday, though, those concerns were all water under the bridge as all of the major US averages not only finished in the green for the week, but they were all up over 1% as well.
Leading the way higher, the Nasdaq 100 (QQQ) rallied nearly 3% putting the index nearly 7% above its 50-day moving average. Even the Russell 2000 (IWM), which at one point on Monday was down over 10% from its record high, managed to finish the week up by more than 2%. Despite the rally, though, most small and mid-cap indices remain below their 50-day moving averages. However, despite all the commentary regarding the underperformance of small caps recently, they are still comfortably positive on the year, and besides IWM, there is a fairly strong degree of uniformity in YTD performance across the various market cap ranges.
Jul 23, 2021
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“We don’t get paid for activity, just for being right. As to how long we’ll wait, we’ll wait indefinitely.” – Warren Buffett
What a difference a few days makes. While the week started off with major concerns regarding the Delta variant, three straight positive days and an up morning in the futures market later, and the Delta variant is the last thing on investor’s minds. Strong earnings in the social media space, as well as earnings from American Express (AXP), are pushing futures higher while disappointing results from Intel (INTC) and Boston Beer (SAM) have been set aside. As far as the social media sector is concerned, the solid results from Snap (SNAP) and Twitter (TWTR) have pushed the market cap of SNAP up above $100 billion while Facebook (FB) now finds itself back in the trillion-dollar club.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, the latest US and international COVID trends including our vaccination trackers, and much more.
As we head into the weekend, we wanted to provide a quick snapshot of some of the major US indices across various market cap ranges. Starting at the low end, small caps plunged earlier this week to multi-month lows before regaining steam in the middle of the week. On Thursday, the Russell 2000 was once again the notable laggard maintaining what has been a string of lower highs and lower lows for the last several weeks. For now, the Summer weakness continues to be noise within a multi-month period of consolidation, but there has been increasing pressure on small caps.
Like small caps, mid-caps have also been laggards for the last several months. As proxied by the S&P 400 Mid Cap Index, we have seen a steady string of lower highs and lower lows since its peak in late April. The index is finishing the week well off its lows, but the downtrend remains in place.
Moving up to the market cap spectrum, large caps have been the area of most strength. As shown by the Nasdaq 100 and S&P 500, both indices have patterns that are as far from downtrends as could be possible. In fact, if the current levels in the futures market hold, both of them will be close to all-time highs.
Jul 22, 2021
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“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” – Peter Lynch
The rally off of Monday afternoon’s low continues to roll on this morning as futures indicate modestly higher levels at the open. There’s quite a bit of economic data coming up throughout the morning, so that will impact prices in the short term. Jobless claims just came out and both initial and continuing claims came in well ahead of expectations. After the close, we’ll have a number of high-profile earnings reports from companies like Boston Beer (SAM), Capital One (COF), Intel (INTC), Snap (SNAP), and Twitter (TWTR).
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, the latest US and international COVID trends including our vaccination trackers, and much more.
It’s been an eventful four days for the Russell 2000. With declines of 1.2% on Friday and another drop of 1.5% Monday, the Russell 2000 came roaring back on Tuesday by surging 3%, erasing all of the declines from the prior two days. On Wednesday, the small-cap benchmark followed up with an impressive encore by tacking on another 1.8%.
Despite all the fireworks lately, the moves in the Russell 2000 have been a lot of sound and fury signifying in particular. As shown in the chart below, the Russell 2000 has been stuck in a sideways trading range since the beginning of February. The key level to watch in the short-term for small caps is the 50-day moving average (DMA), which for the Russell 2000 ETF (IWM) stands at about $224.70. If the index can break that level to the upside, it would be an encouraging signal, while a test and failure to take out that level would suggest more rough sledding ahead.
Jul 21, 2021
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“The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.” – Jesse Livermore
Futures were higher across the board earlier but have given up some of their gains heading into the open as the Nasdaq is now indicated to open modestly lower. Small caps are continuing to build on yesterday’s gains with the Russell 2000 indicated to open up more than 0.7% as investors reassess whether concerns over the Delta variant were a bit overdone.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, the latest US and international COVID trends including our vaccination trackers, and much more.
It’s not often that the spread in 5-day performance between the best and worst-performing sectors in the market is over 10 percentage points, but that is where things stand heading into today’s trading. While Energy is down over 9% in the last five trading days, three sectors (Utilities, Real Estate, and Consumer Staples) are all up over 1% in the last week. Despite its recent sell-off, Energy is still one of the top-performing sectors in the S&P 500 this year with a gain of over 28%. While the losses in Energy have been painful, one could still argue that the sector remains in a consolidation mode following its monster gains off the late 2020 lows. Technology, meanwhile, remains right in the middle of the pack in terms of YTD performance, but in the short-term is one of the most overbought sector’s trailing only Health Care.
Jul 20, 2021
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“The definition of insanity is doing the same thing over and over again, but expecting different results.“ – Albert Einstein
While it wasn’t the only factor behind yesterday’s decline, a key event that spooked many investors (and computers) was a comment from UK Chief Scientific Adviser Sir Patrick Wallace who said that 60% of UK COVID hospitalizations were fully vaccinated. Later in the day, shortly before the US close, he clarified his remarks to say that his numbers were reversed and that less than 40% of all hospitalizations were fully vaccinated. That was a pretty big error, but one that caused some relief on the part of investors as stocks finished off their lows of the afternoon.
Today, futures are higher again, but still well below where they closed Friday. Rising COVID cases have been one driver of the weakness but not the only headwind facing the market. In the short term, investors will also have to contend with weak seasonal trends as well as high expectations heading into earnings season.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, the latest US and international COVID trends including our vaccination trackers, and much more.
One thing that’s been happening over and over again in the market is that every time the S&P 500 tests its 50-day moving average (DMA), it has managed to bounce. Over the last year, there have only been two times where the S&P 500 closed below its 50-DMA and continued to decline meaningfully from there. Both of those occurrences were last year. Before yesterday, there were six other times this year where the 50-DMA came into play and each time the S&P 500 bounced significantly from there. Obviously, this can’t keep going on forever, but in the short-term, but until it doesn’t work anymore, the ‘buy the dippers’ will likely stick with what has worked.
Jul 19, 2021
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“Change before you have to.” – Jack Welch
It’s not looking like a fun start to the trading week for bulls. After falling 300 on Friday, Dow futures have already tacked on another 500 points to that drop and we’re still an hour from the open! S&P 500 and Nasdaq futures are down by significant but not as large amounts, but the real area of pain is in small caps where the Russell 2000 is indicated to open down by more than 2.25%. At that level, the Russell would be down by slightly more than 10% from its 52-week high.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, the latest US and international COVID trends including our vaccination trackers, and much more.
As COVID case numbers rapidly rise across the country and the world, concerns over the trajectory of the recovery have been called into doubt. That trend has only intensified in the last few days, and the yield on the 10-year US Treasury is a perfect example. This morning, the yield is down to 1.23%, which is the lowest since February 16th!
If current levels on the 10-year hold, it will end a streak of 172 trading days where the yield closed above its 200-day moving average. Relative to history, this current streak was nowhere near extreme, but it was the longest streak since December 2018.
