From the cheap seats... As a youngster, I spent a lot of time at Shea Stadium having grown up in the New York City borough of Queens. My favorite two years were 1974 and 1975 because the Yankees moved in for two years as their stadium in the Bronx was being renovated. I had a best pal who was a big a baseball nerd as I was, and for those two summers, we just headed for Shea every time there was either a day game or a double header.
Mets or Yankees game? Didn't matter. Upper deck tickets were $1.25. The grass was green. That ticket plus a scorecard, pencil, hot dog and a soda, meant that with a $5 bill, you went home with change. Funny thing about those cheap seats. You could really see the game well, from the nose-bleeds. You saw Rusty Staub swing each arm in succession in the on-deck circle. You saw Sparky Lyle come in not just for an inning or less to shut down the opposition, but for two innings or more. You saw it all.
It's not often these days... that I get to sit back up high and watch the action from afar. Last week, I did just that. I simply enjoyed the markets for the joy of participation itself. A pleasure indeed to watch, and listen to the financial media each and every day and then choose (or choose not) to act here or there without the full investment of having already made an opinion public (and the first public opinion of the day that I know of, at least in North America).
Perhaps the purest pleasure of the week was the time itself. The time to listen to those financial pundits that I know really do the work and really participate... and the time to laugh at those who... well the rest of this sentence is probably best left unfinished. Let's just say there are more than a few ready to opine without exactly experiencing the kind of everyday risk that you and I do.
Anyway, and I am not just trying to sell newspapers here, the real treat was just listening to our own Jim Cramer, as when he speaks, at least in the morning, I am usually too busy to truly pay full attention. Yes, I am biased, having known the man, having seen the quick mind and the purest, most earnest of efforts. I see the haters (as well as the supporters) on social media... but do not let those who choose slander or mockery, to misguide you for a minute. Jim Cramer is the only man I have ever met who made me think to myself... "There is no way you can out-work this guy, Sarge."
Sure, Jim is one smart cookie, and stands out in a league that attracts highly intelligent individuals en masse, but that work ethic. There is only one human being I have ever met that I was not sure that I could out-work. Just one. One of a kind, that is.
Shades of Success
Of course it's easier to enjoy participating in the financial marketplace when you are primarily an equities trader and equities put in the kind of week that they did last week. Doesn't make it less real. Does make one wonder just how much of one's success has been acquired through hard work, God-given talent, or just enough smarts to not screw up riding the tide as it rises.
In the military, perhaps the highest of compliments is to be referred to as a "winter soldier" in reference to Thomas Paine quotation that opened the first edition of "The American Crisis" published 19 December 1776... "These are the times that try men's souls: The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of his country; but he that stands by it now, deserves the love and thanks of man and woman."
Just about the last thing any military person wants to be called is a "summer soldier", and just about the last thing any trader wants to be remembered as... is a "bull market" trader. Both terms refer to someone who faded away as times became difficult. One never knows, when markets trade at all-time highs, just how much of their success is really them, and how much has been a gift from on high. Even if one has survived more than one market downturn. We sure do remember some of those bull market traders though. Not their names. Just their faces, and how aggressive and bold they always thought themselves to be.
Whadda Week !!
Was it not just one week ago that all of our beloved market's progress appeared to be in jeopardy? Friday, June 18th. The S&P 500 closed down 1.3% for the day and 1.9% lower for the week. Worse than that, the index had surrendered both it's 21 day EMA and 50 day SMA in a single session. One week later the S&P 500 closed at all time highs for consecutive sessions as the Nasdaq Composite nearly did so. The Dow Jones Industrials picked up 3.4% for the week. That said, nobody really tracks the Dow, but the already mentioned S&P 500 did score a weekly gain of 2.7%, while the Nasdaq Composite and Dow Transports both managed 2.4% increases over the past five trading sessions. That surely does count in the scorebook.
In addition, the S&P Mid-Cap 400, as well as the two small-cap indices.. the S&P 600 and the Russell 2000 all soared by a rough 4.3% to 4.4% on elevated trading volume as Friday's action included all of the positioning ahead of this weekend's Russell index reconstitution. Surely, weekly sector performance could not have been more precisely segregated by industry type if the trading had been done almost entirely by algorithms. Oh, wait... trading is done almost entirely by algorithms.
As the Treasury yield curve steepened in response to potential bipartisan cooperation on an infrastructure deal that may or may not pass, with strings possibly or possibly not attached in a way that a seemingly more hawkish (eventually) dot plot could not produce, it was cyclical type groups that dominated last week.
Using Select Sector SPDR ETFs as proxies, all 11 sectors shaded green over the past five sessions. Energy (XLE) led the way as crude prices continued to rise. The Financials (XLF) easily finished in second place. Visions of net interest margin danced in bankers' heads as they slept. Those two groups were followed in step by the other three cyclical sectors, then came the two "growth" sectors and lastly the four "defensive" sectors.
I did want to show you something at the index level. The S&P 500 has remained on trend, and that trend is higher. The Dow Industrials, and Russell 2000 remain range bound, while the Dow Transports are still well below some key averages. Now, the Nasdaq Composite is in the midst of potentially doing something different.
That's right. Now, you see it, and you can imagine my amazement last week as I did not hear anyone else pick up on this. The Nasdaq Composite is attempting to break out of a year to date "ascending triangle", and none of the other major indices are sending this signal just yet. You'll also note that the index is getting close to being technically overbought, but is not quite there, at least not yet, and the daily MACD is extraordinarily healthy with all three components well into positive territory.
So, What Are You Saying?
The deal is this. Economically sensitive stocks have been as hot as any of late. There has been good reason. The banks all passed the Fed's stress tests rather easily. Demand for energy is rapidly increasing on a global scale, and politically, there is at least a chance for some compromise on an infrastructure support/rebuild bill.
That said, fiscal policy remains a political football, and thus... an uncertainty. Speaking of uncertainty, there is the Fed, and the implementation of monetary policy. Obviously there is a split growing at the FOMC as to just how transitory the current burst of consumer level inflation actually is, and just how aggressive the central bank should be in addressing this condition. All perception of current economic conditions will further evolve by this Friday as this is June "jobs week", and we all know that more than 20 states have started pulling back on the federal stipend to weekly unemployment insurance benefits as a means toward driving labor force participation. Is this policy working? What does that do to potential wage growth? I have been up and down the east coast in recent days. If I have seen a storefront without a "help wanted" sign posted, I don't remember it.
The X Factor
The one factor that does not seem to be factored in by anyone right now is a resurgence of the virus. The one thing that we do know about the Delta variant of the SARS-CoV-2 virus is that it is more transmissible than any of the other variants known to be in circulation, and that it causes more severe illness. There is also sketchy evidence that this particular variant, once known as India variant number one, is more able to evade some of the vaccines currently in use. There is also some evidence that this variant does not discriminate by age as other variants have. We hear that the messenger RNA vaccines such as the Moderna (MRNA) and Pfizer (PFE) /BioNTech (BNTX) jabs still defend well after the second dose. As for the adenovirus based vaccines, there is far less certainty. Major concerns would be that much of the planet remains un or under-vaccinated, and here at home (for me, the U.S.) nobody under the age of 12 is protected in the least.
What To Do
I think I may have mentioned above that this is an opinion column. That said, I'll tell you what I have been doing. I have been adding on dips to my copper stocks whenever the market offers one up. That's Freeport-McMoRan (FCX) and Southern Copper (SCCO) . Demand for copper only increases with infrastructure building and ESG style investing now probably semi-permanent forces in asset allocation. I need exposure to the financials. Wells Fargo (WFC) remains my pick. I will be adding on this dip to SoFi Technologies (SOFI) .
As for more "growthy" type stocks, I find it hard to beat Nvidia (NVDA) or ServiceNow (NOW) , while exposure to cybersecurity is paramount. My choice there has long been Zscaler (ZS) . There's one more Sarge stock I wanted to discuss with infrastructure back in the national discussion. I am currently out of United Rentals (URI) but strongly considering re-entry.
Traders will see that URI re-took the 21 day EMA late last week, and battled to hang on to that level from Wednesday through Friday. This is key short-term, while the 50 day SMA is more important to investors. I see URI hang on to that green line this morning, and I will restart the entire process of position building. The daily MACD is sending a hesitantly bullish signal. Bullish because the 12 day EMA has crossed above the 26 day EMA. Hesitant because they are both still in negative territory as the 9 day EMA has recently gone positive.
Economics (All Times Eastern)
10:30 - Dallas Fed Manufacturing Index (June): Expecting 31.8, Last 34.3.
The Fed (All Times Eastern)
09:00 - Speaker: New York Fed Pres. John Williams.
11:00 - Speaker: Philadelphia Fed Pres. Patrick Harker.
12:10 - Speaker: Reserve Board Gov. Randal Quarles.
Today's Earnings Highlights (Consensus EPS Expectations)
After the Close: (MLHR) (.39)