The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Stocks in motion
Treasuries continue to dislike the environment but stocks like it. Apple and Amazon announced last night and Apple was punished while Amazon was rewarded. AAPL fell about 7% and AMZN climbed 15%. The rest of the Mag 7 rallied too. That’s a lot of market cap on the rise, so the index climbed strongly. In the meantime, yields climbed 3-5 bips across the Treasury curve. The tale of two markets continues. In a different market, the Japanese government confirmed that it intervened in the Yen market yesterday. This was widely assumed already but the confirmation commanded headlines. It looks like more Yen intervention occurred today as well. So far, the substantial Yen moves appear to be only affecting the currency market.
The S&P just broke above the 50-day moving average (7472). This signal should confirm the new bullish trend and draw the technical and momentum-based investors into the long side shortly. With a little help from the headlines, this suggests that we’re on our way to new all-time highs (7621). We’ve been coming close for a handful of summer weeks so perhaps this is finally the time for fresh push north.
Technicals are sometimes interesting but my point today is that we’ve been stalled in the 7400-7500 range for about two months. This pause in the bull market was always viewed as a digestion period, a stretch of time for the market to settle and stabilize after the eye-popping gains of April and May. Now that we’ve seen a lot of earnings announcements, and we’ve heard from the Fed, and we’ve spent two months waiting-and-seeing for information either confirming a bull market or rejecting it…. We can finally go.
The economy continues to chug along. The stock market continues to be a bull market. Inflation has come in and the new Fed isn’t hiking. Earnings continue to be good. These are the circumstances stock investors are considering.
With the strong bounce from Wednesday’s selloff, it looks like the equity sentiment is swinging positively. The only material impediment remains Treasuries. Today, equities shook off the yield curve. I don’t think it can continue to do that but we will see.
Certainly, if yields come in sharply, stocks are really going to zoom.
From a sentiment standpoint alone, stock investors just turned the corner and the emotional shift looks to have legs.
See you Monday, have a great weekend.
-Mike
Visdom Market Commentary
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