One thing is certain as we head into the end of the quarter and the month: 30 days ago there were very few who thought technology and growth were the stocks to own. But there is something else that no one believed 30 days ago: that the dollar could or would rally.
Yet, here we are with Nasdaq up about 12% since the lows and the buck now being chattered about as a potential headwind for commodities. Imagine that!
Back in late May, the Daily Sentiment Index (DSI) for the buck was nearing single digits and there was talk of a breakdown to new lows. It took a few weeks of groping for a bottom, but eventually that sentiment with the boat leaning too far to one side mattered. Now on Tuesday it was all anyone on financial TV wanted to talk about: the strong dollar.
I do not have a strong view on the buck here. I was positive on it near the lows, so I will maintain that bias for now, but that chatter about a higher dollar will eventually get too loud. It always does.
With that mind, remember how giddy folks were just a few short days ago? Well the Russell 2000 has lost 1% so far this week and I see some cautious comments creeping into the commentary. I would not call it bearish chatter by any means, but it certainly has been toned down since Monday morning.
I am not much for seasonality plays in the market. I am fond of saying that when there is some seasonality trade statistic that has worked 95% of the time you can be sure if I decided to trade it, it will turn out to be part of the 5% of the time it doesn't work. Yet I have noticed an interesting pattern in the year 2021.
We are now entering the seventh month of the year. With the exception of January breadth has been quite positive on the first day of the new month.
January saw net breadth on the New York Stock Exchange at negative 1,300, which quite frankly for a day the S&P lost 55 points wasn't even that bad. But February was positive 1,800. March was positive 2,000. April was positive 2,000. May was positive 1,300 and June, when the S&P lost two points, was positive 1,500.
Perhaps I am trying to find a reason for the market to rally one more time this week and this fits that narrative, but you have to admit with the exception of January it seems folks have been inclined to buy stocks on the first day of the new months.
I am still looking for a pop in the Oscillators, which are sitting there like they can't even lift themselves off the mat. That's the lethargy in the market.
With Wednesday the last day of the month and the quarter it's a coin toss. But maybe the first day of the new month we can see a final rally to put sentiment at giddy just as we get overbought.