Weak Economic Data Discourages Bulls and Validates Fed’s Inflation Policy

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Commentary

  • Summary Analysis:
    • On the surface, today’s stock market results were mixed and relatively unchanged. Deeper analysis indicates sellers are in control and bulls are not as eager to commit new capital, especially in small caps.
    • Weaker than expected Housing and Consumer Confidence data validated the transitory inflation view to which some dovish Fed officials subscribe. The 10-year treasury shed 4 bps or -2.50% and closed @ 1.56%.
    • The above pressured the US Dollar (UUP) and enabled the Euro (FXE) to maintain its short-term uptrend while the Yen (FXE) attempts to form a bullish inverted head-and-shoulders.
    • With respect to Cryptocurrencies, the most positive thing about the session’s short-term profit taking is that losses were limited to single digits, unlike last week’s double digit declines.
    • Gold (GLD) really shined by partially filling a down gap it made Jan-7-2021. The probability of Gold Futures breaking $1900 is extremely high. Meanwhile Crude Oil Futures are consolidating with resistance @ $67. If oil prices clear this level, then expect the US Oil ETF (USO) to break above $45 and test $47 to $50, which would also be bullish for energy stocks.
    • Real Estate (IYR) is climbing towards a resistance test @ $100.75, i.e. Feb-2020 high and the Homebuilders (ITB) is reversing upward for a potential retest of resistance @ $78.
  • ETF Equity Markets:
    • US Markets: It was a good start but an ugly finish. All four of the major US indices, i.e. QQQ, SPY, DIA and IWM rose to new 2-week highs but quickly faded after the first hour of trading.
    • International: Leaders in China (FXI); and Emerging Markets (EEM). Laggards in Latin America 40 (ILF); and Brazil (EWZ).
    • ETF Sector Strength: Consumer Discretionary (XLY); and Real Estate (XLRE).
    • ETF Sector Weakness: Utilities (XLP); Financials (XLF); and Energy (XLE).
  • Large-Cap Volume Surgers:
    • Graftech Int’l (EAF): -4.64% on 280% volume surge.
    • Axa Equitable Hldgs (EQH): -3.39% on 194% volume surge
    • Virgin Galactic Hldgs (SPCE): -4.83% on 145% volume surge
    • Royal Carribean Cruise Lines (RCL): +3.65% on 86% volume surge
  • Small-Cap Volume Surgers:
    • Provention Bio Inc (PRVB): +26.82% on 2210% volume surge
    • AMC Entertainment Hldgs (AMC): +19.96% on 182% volume surge
    • Gamestop Corp (GME): +16.34% on 39% volume surge
  • Market Moving Events:
    • Economy / Consumer: Consumer Confidence (May-2021) @ 117.2 vs estimates @ 119.2 and prior @ 117.5.
    • Real Estate / Residential: S&P Case Shiller Home Price Index @ 13.3% vs estimates @ 12.3% and prior @ 12.0%.
    • Real Estate / Residential: New Home Sales (Apr-2021) @ 863k vs estimates @ 970k and prior @ 917k; New Home Sales (m/m) @ -5.9% vs prior @ 7.44%.
    • Central Banks / US: Tueday’s Fed comments do not reflect a central bank overly concerned with inflation. According to Richmond Fed President Barkin, he “pays attention to market measures of inflation expectations, and those have not yet escalated over target.” and Chicago Fed President Evans believes “it is important to emphasize that the recent increase in inflation does not appear to be the precursor of a persistent movement to undesirably high levels of inflation.” 
    • Earnings / Positive Surprises: AZO.
    • Earnings / Negative Surprises: n/a.

ETF Daily Market Performance Summary: 22-May-2021

etf daily market summary for stocks, bonds, currencies, cryptocurrencies, commodities, real estate, and equity sectors
Click to enlarge

Market Diary: 22-May-2021

market diary summary for NYSE and Nasdaq exchanges: advancers, decliners, new highs and new lows, plus mega-cap market breadth
(Click table to enlarge)

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