Thursday’s stock market plunged, but Friday’s rally saved the week.
Apple has surpassed our aim of $145 all-time highs.
As DIDI issues impact associated names, China the empire hits back.
Another week has passed with nothing new to report, so let’s move on to new highs. It wasn’t quite that simple, since we had a couple scares in the midst of the week. China chose to mark the Fourth of July weekend by slamming certain US-listed Chinese stocks, many of which had been caught in the crossfire of the DIDI affair. As they watched, Alibaba (BABA) stockholders experienced a severe case of déjà vu. On Friday, BABA retook the $200 mark, putting the week on a good note.
Before most people go on vacation for the summer, the bond market decided to have one last shake-up. As everyone piled in, positions were closed, leading yields to plummet. Stock markets piled out of stocks, believing the world was ending (again!). Early in the week, the Fed and oil added to the headwinds. As OPEC haggled and unity was thrown out the window, oil soared to multi-year highs above $77. Saudi Arabia chose to raise prices for the United States and the European Union before the United Arab Emirates announced it would expand supplies to take advantage of higher pricing. The Fed minutes then added to the bears’ delight by hinting that tapering and rate hikes were on numerous Fed members’ thoughts considerably sooner than previously thought. Finally, the delta form of covid prompted lockdowns in Australia and Japan, as well as a postponement of reopening plans in Europe. Despite this, by Friday, everyone had forgiven each other and peace had been restored. Apple (AAPL) shares finally hit our all-time high call on Friday, sending equities on a tear. We first made this one in early June, so we’re still getting praise!
Meme stocks have had a rough week, and retail has taken a hit as a result of the China news. Many retail favorites have exposure to China, thus electric car manufacturers (NIO, XPEV), as well as Tesla, suffered a hit. The Thursday swoon appeared to portend a meme stock carnage, but Friday showed rebounds, albeit AMC and GameStop (GME) trailed. AMC was an interesting case in point, as retail investors appeared to compel CEO Adam Aron to abandon plans to issue further stock.
Shorts continue to have a monopoly on the retail market. This was brought to our attention by the market ear folks. The newest short data from Goldman Sachs shows that shorting is continuing to decline. Is it really worth it if you’re going to be squeezed by the shopping crowd?
According to the most recent statistics from Refinitiv/Lipper Alpha, equity Exchange Traded Funds (ETFs) saw net withdrawals of little under $800 million in the week ending July 7. The S&P 500 (SPY) experienced the most inflows ($3.1 billion), while the Russell 2000 (IWM) saw the second highest outflow ($852 million) (IYR). The week saw $3.5 billion in outflows from traditional stock funds, the thirteenth week of net outflows in the last fourteen.
On Friday, there were further record highs, with the possibility of a record high close. With firm support around $420 and a large volume profile bar, this is our buy the dip zone to try if we ever get another dip! As volume thins, a break of $408 will almost certainly result in an acceleration. The $447 level represents the trendline’s resistance. Although the oscillators are neutral, the Moving Average Convergence Divergence (MACD) does not match the highs, resulting in a bearish divergence. Please utilize stops and manage risk as usual.
The Russell 2000 (IWM) has recently retraced to test the lower trendline after breaking it. Failure reinforces what appears to be a bearish triple top. The Nasdaq (QQQ) and S&P 500 (SPY) are less likely to continue rallying the longer this continues unfavorable.
Today, the channel looks more like the ascent of the Eiger than the SPY. Can we put the top of it at $370 to the test? That’s only 3%, which isn’t much given the market’s insatiable desire for new highs this year. However, the volume up here is awful, so I’m not giving the move any credence. The Relative Strength Index (RSI) is currently firmly in overbought territory, and as we saw last time in September, it usually proves true ultimately. With a good volume profile support, a buy the dip zone to try looks around $340-342.
It’s come back. The earnings season has returned, and banks are once again leading the push. The investment banks blasted it last quarter, so the bar has been set very high. Equity trading income should be supported by record high stock prices, but corporate transactions have slowed as SPAC and IPO deals have decreased this quarter, so it will be fascinating times ahead. The airline season is kicked off by Delta (DAL), not the virus. Despite the fact that Delta (the virus this time) is expected to disrupt European schedules, optimism abounds. Themes to keep an eye on are input costs, which are sky-high due to rising oil prices, and airlines consume a lot of that stuff! Hedging data, if available, would be beneficial.
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