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Good morning. It is nice to see 30 year mortgage rates back below 5 percent. They ticked up near 6 percent and 13 year highs a few weeks back.
The S&P and Nasdaq 100 are still well below their 200 day moving averages but moving up and on a mission to touch them it seems from below.
I am rooting for us to capture the 200-day moving averages. The first ‘growth’ index to do that is biotech, but it was also the first and hardest hit tech index on the way down.
The good news is that people are still out there buying technology stocks…In June it looked like that would never happen again. So many technology stocks have rallied 50 percent and are still well below their 200-day moving averages so I would not be surprised to see a continued rally but would also expect some chop and some blowups.
As always, Ivanhoff and I got together for Momentum Monday to tour the markets looking for momentum. You can watch/listen to the video here. I have also embedded the video below on my blog:
Here are Ivanhoff’s thoughts:
The typical bear market rally is a 50% to 61.8% retracement from the last major high. For the S&P 500 (SPY) that would mean 410-420. It is not far from there. In the meantime, some of the most shorted stocks have staged monstrous short squeezes. Such price action often precedes overall market pullbacks.
The job numbers last Friday surprised everyone. Why does it matter? The market rally in the past month or so has been mainly based on the assumption that the worst of inflation is behind us and the Fed’s tightening is not going to be as aggressive in the future. This assumption might turn out to be a bit premature. We will know soon enough. July CPI readings come out on Wednesday morning. As usual, we will be paying attention to how the market reacts to it; not to the numbers themselves.
Otherwise, the recent rally has been fueled by government spending (clean energy, semiconductor bills), acquisitions (especially in the biotech field), and general improvement in market sentiment – most earnings received a favorable market reaction this season. Let’s see if those catalysts will be strong enough to fight a hawkish Fed.
Elsewhere…
Here is Charlie’s ‘This week in Charts‘ and his 7 charts of the week.
Here is the Stocktwits 25 momentum lists.
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