/ May 21
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Wednesday:
N/A
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Thursday:
S&P Global Services PMI Flash (50 exp.)
Existing Home Sales (4.1M exp.)
Initial Jobless Claims (230K exp.)
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Friday:
New Home Sales (0.69M exp.) -
Wednesday:
Target
Canada Goose
Lowe's
Snowflake
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Thursday:
Ralph Lauren
Advance Auto Parts
Deckers Outdoor
Intuit
Workday
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Friday:
N/A
Daily Briefing
Custom Strategies have been migrated and are available in the “Strategies” folder along with all of our usual models. Performance and stability improvements ongoing.
*The S&P 500 had a six-session win streak going, but on the seventh day it rested; there were no gains yesterday, as the stock market operated in consolidation mode following the massive run from the April 7 low; the Dow and Nasdaq followed suit, posting modest losses of their own, while the Russell 2000 was flat;
*There wasn't any U.S. economic data of note to drive things, and the corporate news was limited; there was some added attention on President Trump's visit to Capitol Hill to discuss his objectives for the reconciliation bill with House GOP members; reportedly, he told them not to mess with Medicaid cuts and rebuked the efforts by the SALT Caucus to raise the deduction limit beyond the $30,000 currently proposed, telling them to "let it go."
*SPY declined -0.34%, staying in the red for the whole session; selling pressure later in the day pushed prices to $590, but the dip was eventually bought; the benchmark ETF finished near the low levels that were recorded throughout most of the day; our analysis points to a more protracted decline, as there is little technical or fundamental support for equities until $569 (S1); we do expect this probable dip to be bought;
*The MACD signal is ripe for a sell reversal, as conditions remain extended;
*There was more buying enthusiasm this time among Dark Pools investors, with the average index rising to 47%, now in Neutral territory; this is a change from the recent trend of constantly bearish institutional flows that have run counter to the index level price action;
*This aligns with our expectation that large traders are out to buy the dip, when it eventually arrives;
*There was little news to drive the price action other than the workings on Capitol Hill; a component of uncertainty around the reconciliation bill also contributed to the consolidation theme, though we would attribute the pause in the rally to buyers fatigue;
*SPY only recorded 26% bullish options volume in the short term (calls bought + puts sold), while the medium term had 80% bullish volume - quite a discrepancy;
*However, there wasn’t much conviction in the day’s selling action either; eight S&P 500 sectors finished lower, but only one -- Energy (XLE, -1.0%) -- declined at least -1.0%; losses for the remaining sectors ranged from -0.2% to -0.8%; the three winning sectors -- Utilities (XLU, +0.3%), Health Care (XLV, +0.3%), and Consumer Staples (XLP, +0.2%) -- reflected a more defensive-minded tape;
*Market breadth skewed negative; decliners led advancers by an 8-to-5 margin at the NYSE and by a roughly 11-to-10 margin at the Nasdaq;
*Nevertheless, the number of stocks trading above their 50-DMAs has reached 2 standard deviations on a historical basis; this type of extension has previously resulted in flat-ish returns over the next months, or an outright drawdown;
*A very similar disposition is reflected in our Market Sentiment metric (which is basically a breadth measurement); the number of stocks “overbought” has reached 2 standard deviation extremes, as has the reading score itself (76/100);
*Similar levels in the past have preceded short term price drops of around -5% / -6%;
*TLT declined -0.72% and slightly finished below technical support at $85.6 — we would chalk this off as “holding support” for now, as the overall trend of the chart is moving more and more toward a neutral (range trading) state;