Daily market review July 3, 2024 (10Y treasury yield roll over, last remaining bear Marko Kolanovic leave JP Morgan, Bitcoin testing 200Day MA as Mt Gox selling pressure intensify )
Happy 4th of July everyone, hope you have a wonderful holidays with your family
Broad market overview
Fall in 10Y yield continue 1 day Powell disinflation remarks, this time caused by a string of softer economics data, especially softer job number in the form of lesser ADP job growth and higher unemployment claim, is it really caused by the softer number though, not really. Largely speaking, market is increasingly recognizing that the last lingering concern with inflation is over, especially so for those who analyze inflation trend path, and it’s subcomponent trend. The smart monies still have lots of chips on the table, partly reflected in the shallow uptrend retracement.
But lots of things have happened in the financial and banking sphere in the past few days, some of which may have medium term implications going forward. Most notable of which, last remaining bearish analyst - JP Morgan Marko Kolanovic has left… I will dive deeper into it and wrote about it’s medium-long term implications in the current bull market cycle.
Semiconductors is the top performer of the day, gaining +2.27% and leading Nasdaq 100 to close at 0.87%, S&P 500 gain 0.5%. All other indices have little to no gain yet again, just another day of cap distortion effect working its magic again ( not complaining, and I am fully aware that it’s a feature rather than a bug of the current market cycle )
Overall, cap-weighted indices outperform Small and mid cap, equal weighted counterpart.
S&P 500 11 sectors overview
Technology, Materials and Discretionary are the best performing sectors, while healthcare and financials are the worst performing sector.
MOVE index
On July 3rd 2024 session, MOVE index has broken down as 10Y Treasury yield fell, creating a lower high yet again.
Move index is currently at 102.83, ( bond price implied volatility is expected to be around 10.28% per annum. ) Lower MOVE points to (implied) lower bond market volatility going forward.
Bond volatility moving lower translates into less haircut to bond, in which more liquidity can be extracted from the collateral pool.
NYSE & Nasdaq market internals
More advancers relative to decliners on July 3rd 2024 session. More new high and lesser new lows in NYSE side. And Volume is lesser than usual on the eve of 4th of July holiday.
Generally after Memorial day holiday, volume will decline gradually heading into the summer season.
On July 3 2024,
2.19 to 1 NYSE Advancers to Decliners ratio (1915/873 )
1.39 to 1 Nasdaq Advancers to Decliners ratio (2375/1703 )
% of stock above 20Day, 50Day, 200Day
Breadth stalled while SPX breakout from recent consolidation range.
I sense the breakout is near after this recent "correction in time", and it may bring about a broader based rally and improvement in breadth
% of SPX stock above 20D MA : 47.2%
% of SPX stock above 50Day MA : 46.8%
% of SPX stock above 200Day MA : 66.6%
TNX and high yield bond
10Y yield drop after reconnecting with 20D MA and is at 4.436%, 10y yield fell from 4.48% to 4.35% 1 day after Fed chair Powell disinflation path remarks.
Will monitor closely to see when 10Y treasury yield breach the 4.3% ish support.
Tesla revival ?
People are cheering at the break of down trend line, time to shortlist it in our chartlist and establish action plan + trade parameters
Financial and economic news front
The last standing bear Marko Kolanovic of JP Morgan has left.
Recalled that around Mid May 2024, the other famous bear Mike Wilson from Morgan Stanley has turned around and upgraded it’s S&P 500 forecast by 20%.
Subsequently, Marko Kolanovic became the sole Bearish analyst remaining in the Banking side.
According to the latest new hitting Bloomberg newswire, Marko Kolanovic has left.
It’s inevitable that he will either have to join the bullish side or be forced to leave, otherwise he’s dragging JP Morgan reputation through the Mud, when his forecast is too far from consensus. Job no.1 of banking analyst target is to keep your forecast close to consensus. To do that he will either have to join the bullish side or leave the bank, regardless of which options he chose, the outcome is the same, no Bear left in the among the megabank analyst.
Even Piper Sandler is giving up on forecasting after the Bullrun in stock market is proving them wrong time and again, leaving them in the dust.
What are the implications when there’s zero bear left among the ranks of Megabank analyst?
In terms of Medium term implication, Chase will get increasingly dangerous and accident will likely happen in the future ( not saying market will topout and plunge to start a new bear market, but sudden, inexplicable fall , deeper retracement will become more likely in the futures )
Ironically, the last prediction from Piper Sandler may just the cast in the stone sometime in the future ( even if it will not happen this summer, it may still happen down the line. )
Of course Paid subscribers will get my latest thoughts on when it may possibly happen in the future when the signs are lining up, and the relevant action to take.
AAII Asset Allocation
Retail investors allocation to stock is hitting new high, reinforcing the case that chase are happening, which means market gain will become harder compared to previous period of easy gain. in other words, a grind higher in the future with the occasional deeper fall/retracement that can seriously spook the investors.
Unemployment claim making new high
Unemployment claim has hit new high in the current economic/market cycle. Putting market in the bad news is good news mode, where weakening of economics data is celebrated as rate cut possibility is priced in further.
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 ( which is Mt Gox creditors selling bitcoin after getting payback )
Bitcoin daily chart
Bitcoin is below 20D and 50D MA, 20D MA crossed below 50D MA
Bitcoin has resumed dropping after reconnecting with 20D MA as BTC is trap in the storm eye of selling pressure from Mt Gox creditors
Will watch closely if it can successfully defend the 200D MA ( likely depend on the when the selling pressure from Mt Gox creditors will subside )
Further update at July 4th 9:15pm US eastern time, July 5th 9:15am Singapore time,
Selloff in Bitcoin has accelerated, previous swing low at 58.4K and 200D MA has been breached
Will Monitor extremely closely if it either of the 3 scenario applies,
1) successfully defend the 200D MA
2) further waterfall decline
2) short stay below200D ma and develop a certain fail breakdown pattern
BTC Liquidation analytics
in the past 24H , 7 to 1 long:short liquidated ( more than 7 long liquidated vs 1 short liquidated )
in the past 4H, 16.23 to 1 long:short liquidated
so long trade is being pummeled, kaput now. Monitoring closely for signs of selloff exhaustion
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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