The senior indices did little on Monday but small-caps lagged and there was some major profit taking in high momentum names like Zoom Video (ZM) , Veeva Systems (VEEV) and Chewy (CHWY) . The lack of speculative strength is always a concern, but this is a market that has had a great run so far in June and is entitled to some rest heading into the Fourth of July holiday.
This morning there is a takeover in the biotechnology sector that may help to liven things up a bit. Biotechnology lagged yesterday on cooling speculation, but this morning AbbVie (ABBV) is making a deal to acquire Allergan (AGN) at a substantial premium. ABBV is indicated down almost 8% on the news, which is not the reaction they had hoped for, but this should raise some speculation about other potential combinations in the biotechnology sector.
The most significant technical action is in gold (as measured by the SPDR Gold Shares ETF (GLD) ). Gold has been flying higher and has hit multi-year highs primarily on the weaker dollar. The weaker dollar is primarily due to the dovish Fed, which makes the lower-yielding U.S. currency less attractive as a place to park cash.
Gold is also benefitting from increased geopolitical concerns as the G-20 meeting approaches. Issues with Iran are a concern and there have been obvious efforts by U.S. officials to keep expectations for progress on China trade quite low. There are some of the usual platitudes about how a deal is possible, but there isn't an easy path to a deal.
Gold is a traditional safe haven asset, but that is spilling over to what many consider to be the modern alternative, which is Bitcoin. Bitcoin is fast approaching $11,500 now and is showing signs of going parabolic as it did back in December 2017.
I trade Bitcoin using the Grayscale Bitcoin Trust (GBTC) , which carries a premium but tracks bitcoin quite closely. In December 2017, GBTC exceeded $38 before it collapsed. This morning it is indicated to open over $15. Many speculators are looking back at that prior move in Bitcoin and don't see any reason that another crazy move could not occur.
The momentum in gold and bitcoin and the takeover in biotechnology will add some pockets of interest today but more important for the broad market will be whether there is renewed interest in the "glamor" high-beta momentum stocks and the hot recent IPOs. There needs to be some broadening in the speculation to keep this market moving to retest recent highs.
Technical conditions for the major indices are still quite positive, but the underlying action in momentum names is cooling. It may just be a healthy pause but we will have to monitor it closely and take action should there be further deterioration.