/ May 13
-
Tuesday:
Core Inflation Rate YoY (2.8% exp.)
Inflation Rate YoY (2.4% exp.)
---
Wednesday:
N/A
---
Thursday:
PPI MoM (0.2% exp.)
Retail Sales MoM (0.1% exp.)
Initial Jobless Claims (230K exp.)
---
Friday:
Building Permits Prel (1.45M exp.)Michigan Consumer Sentiment Prel
-
Tuesday:
Tencent Music
---
Wednesday:
Tower Semiconductor
Cisco Systems
Jack In The Box
---
Thursday:
Walmart
Deere
Take-Two Interactive Software
---
Friday:
N/A
Daily Briefing
*The stock market closed sharply higher across the board; the Dow Jones Industrial Average was more than 1,100 points higher than Friday's close; the S&P 500 jumped 3.3% and the Nasdaq Composite closed 4.4% higher;
*Market participants were enthused by a notable easing in the trade war with China; both the U.S. and China agreed to a 90-day reduction in tariffs, effective Wednesday, with the U.S. dropping tariffs on China from 145% to 30% and China dropping tariffs on the U.S. from 125% to 10%;
*SPY broke above the key resistance level at $570, comprising both the 200-DMA and the S1 retracement; this is a bullish development as long as $570 turns into confirmed support on a retest; given that the benchmark ETF is highly overbought especially in the short-term, a pullback would be the most logical next development, especially since there is a huge gap that needs to be “filled” in the daily data; as far as resistance goes, the bar moves to $618, implying new all-time-highs on the horizon;
*The MACD signal continues to remain exceedingly elevated, as the price surge reverses the cooldown momentum in the histogram;
*To our surprise, Dark Pools traders were net sellers yesterday, with 12 out of 20 top S&P 500 stocks in distribution mode (index below 45%); PG and COST, defensive companies by all measures, were bid up instead;
*Risk-on plays including many Mag 7 stocks saw outright bearish flows, despite positive price performance: NVDA (+5.44%), AAPL (+6.18%), MSFT (+2.4%), AMZN (+8.07%), TSLA (+6.75%) and GOOG (+3.37%); this divergence is notable in the context of the current FOMO-driven price surge;
*GEX for the same subset of stocks remains positive — a bullish sign but not necessarily for the very short term; our interpretation here is that hedge funds and institutions have largely sit this rally out, having either reduced risk exposure completely or having rotated out of “tariff-exposed” companies like Amazon and Apple, which were by far the outperformers of yesterday;
*What this also means is that the same underweight portfolios will need to be re-risked eventually, putting a floor under any pullback and explaining the “buy-the-dip” regime expressed by positive GEX;
*Institutions must be seeing that reductions in tariffs between the U.S. and China expire in 90 days if both sides can't reach a more permanent trade deal;
*Instead of stocks, there was heavy buying in long dated treasury bonds (63%) despite the negative price action; Gold was sold both on the market surface (-2.82%) and within Dark Pools (just 33% buying);
*However, the market was mostly focused on the positives for yesterday, fueling an everything-rally; moves were helped by short-covering activity and a fear of missing out on further gains, as previously explained;
*Apple, along with other mega caps and chipmakers, helped propel the S&P 500 technology sector to close 4.7% higher. The consumer discretionary (+5.7%) and communication services (+3.4%) sectors, which also house mega cap constituents, were among the top performers;
*The risk-on bias in the market left the defensive-oriented utilities sector (-0.7%) alone in the red by the close;
Sector ETFs relative-to-SPY returns for yesterday
*The risk-on skew also resulted in the selling of Treasuries, the gain in the U.S. Dollar Index (+1.6% to 101.90), a drop in gold prices ($3,228.90, -15.80, -3.5%), and the sharp decline in the CBOE Volatility Index (-16.3%, or 3.55, to 18.35);
*The 10-yr yield settled eight basis points higher at 4.46% and the 2-yr yield settled 12 basis points higher at 4.00%; yields are becoming problematic again for the Trump admin;
*TLT lost -0.93% and is headed toward its support level of $85.6; despite the negative performance on the day, TLT was heavily accumulated by institutional investors, though it remains in negative GEX territory;