Daily market review July 1, 2024 ( market is still stuck in consolidation range, while 10Y yield spike and internals worsen)
Broad market overview
At some point you do have to wonder which market is someone referring to when they commented on it, because market is becoming increasing bifurcated and are not exactly sharing the same fate.
Cap weighted market is stuck in consolidation at recent range high, while small and mid cap is stuck in consolidation at recent range low.
Anyhow, Cap-weighted indices managed to eke out some positive gain after suffering some initial swoon at the opening hours when the 10Y yield spike.
While small&mid cap, equal weighted S&P500 and transportation are suffering losses ranging from -0.76 to -1%.
Overall, cap-weighted indices outperform Small and mid cap, equal weighted counterpart.
S&P 500 11 sectors overview
Technology is the best performing sectors. While Materials, Industrials, and Real estates are the bottom ranking sectors.
MOVE index
MOVE has breakup to the upside as 10Y yield spike, will see if it has any follow through subsequently.
Move index is currently at 106.23, ( bond price implied volatility is expected to be around 10.62% per annum. ) higher MOVE points to (implied) higher bond market volatility going forward.
Bond volatility moving higher translates into more haircut to bond, in which less liquidity can be extracted from the collateral pool.
NYSE & Nasdaq market internals
More Decliners relative to Advancers.
Generally after Memorial day holiday, volume will decline gradually heading into the summer season.
On July 1 2024,
2.08 to 1 NYSE Decliners to Advancers ratio (1891/905 )
1.63 to 1 Nasdaq Decliners to Advancers ratio (2608/1599 )
% of stock above 20Day, 50Day, 200Day
Shorter term Breadth decline further while SPX is still stuck in the range without breakout from either direction
% of SPX stock above 20D MA : 40.2%
% of SPX stock above 50Day MA : 41.8%
% of SPX stock above 200Day MA : 67%
Does 10Y yield spike spook the market ?
To answer this question, we need to look at the following charts and refer to the following research.
TNX and high yield bond
10Y yield risen 4.48% currently did not cause any material damage to High yield bond and cap-weighted indices… so things are fine as of now.
so at what level does 10Y yield start cause material damage to stock market ?
According to 3-14 research, 10Y yield “spike” will only spook the market and affect performance if it’s at the 80th percentile of recent 3 months range, which is around 4.6X, so if it reaches 4.6X%, we may have to be more cautious.
Bitcoin
According to the foremost Global Liquidity Expert, Bitcoin track the Global Liquidity relatively closely, lagging only by about 6 weeks, it display the quickest responsiveness to changes in liquidity conditions.
But the strange thing is, Stock market is performing better and making new All Time High while Bitcoin is not; this is quite a stark contrast compared to Q1 situation, where Bitcoin made new high before benchmark stock market. Liquidity condition is still going up and getting better compared to April/May, so the only reason I could think of is that, Bitcoin is mired in its own market idiosyncrasy, while stock market is obeying in its own cycle characteristics
Bitcoin daily chart
Bitcoin is below 20D and 50D MA, with 20D MA below 50D MA
Bitcoin is currently reconnecting with 20D MA,
RSI is bouncing back to 50 level
will be watching closely to see if it bounce higher or lower from 20D MA
As always, we will continue to monitor the charts, assess the bullish/bearish evidence day-by-day to make appropriate capital allocation and investment decisions on all time frame ( short, mid & long term )
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