Daily market review June 10, 2024 (Market in wait and see mode, why was NFP data confusing, a look at institution flow and positioning)
In this entry, we will go though various market sectors performance and market internals, and attempt to explain why last Friday NFP data was confusing the market participant. We will look at BIG institutions positioning and flow data, to see what insight we can glean from the flow and positioning of the big players.
If I have sufficient time tomorrow, I will publish an article looking at fed Dot plot expectation from market participant and action plan according to various scenario.
Broad market overview
Ahead of Wednesday CPI and Fed meeting day, market participants are mostly in wait and see mode, as a result market likely to stall, move in small range ahead of all important Wednesday.
Semi is the leader, closing with a gain of 1457%, nothing much to comment for the rest.
While the new high in cap weighted indices is still pending for the rest of the market to catch up, this means equal weighted counterpart has the next 90days to prove itself, and I believe the broadening out will most likely happen before mid August, otherwise it’s another notable signal to be cautious. But then again, this year is an election year, so market will in all likelihood meet and surpass this challenge with flying colors.
S&P 500 11 sectors overview
Most sectors are flat.. except for healthcare, it has 8 consecutive green bar and may breakout in near term if conditions are favorable. ( breakout immediately or retrace then breakout )
Nasdaq 100
Nasdaq 100 is hitting upper limit of 63D Bollinger band, it may stall/retrace before the next up move
Just to refresh your memory, Large institutions normally rebalance every quarter, 1 quarter = 3 months, which is about 63 market trading days. So that’s the rationale of this indicator.
MOVE index
Move index has dropped below 100 and is currently at 94.16, ( bond price implied volatility is expected to be around 9.41% per annum. ) Lower MOVE ( above 100 ) means a lower bond market volatility.
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
Almost Equal Advancers and Decliners, market in wait and see mode. And after Memorial day holiday, volume will decline gradually heading into the summer season.
On June 10 2024,
1 to 1 NYSE Advancer to Decliner ratio (1402/1403 )
1 to 1.01 Nasdaq Advancer to Decliner ratio (2135/2112 )
% of SPX stock above 20Day, 50Day, 200Day
Market and breadth stall heading into CPI release and Fed meeting on Wednesday
% of SPX stock above 20D MA : 39.2%
% of SPX stock above 50Day MA : 49.8%
% of SPX stock above 200Day MA : 69%
Why was the NFP confusing to the market participant
NFP gain 270K jobs while household survey data show job losses , the opposite direction that both of this number is displaying in the latest month is perplexing many people. But more participant are leaning towards significantly less gain than NFP print ( just to refresh your memories, NFP data may have downward revision of 700K job over 2023 , in my previous entry )
According to Bloomberg's chief economist Anna Wong: "May’s jobs report presented contradictory views of the labor market, as we expected. The establishment survey shows robust gains in nonfarm payrolls — yet the unemployment rate rose to 4.0%. We believe the latter currently offers a closer approximation of reality than payrolls, as BLS’ model for estimating business births and deaths – which added 231,000 jobs to the nonfarm-payrolls print in May – is lagging the reality of surging establishment closures and falling business formation. We think the underlying pace of current job gains is likely less than 100,000 per month.”
Institutional Investors flow and positioning
Per BofA tech has been experiencing outflow, since end May
Is the outflow still continuing ? yes according to JP Morgan data, still declining for the past 10 days, 10days flow are most negative since march this year.
This explains why latest NAAIM drop from 92.2 to 68.6, sharpest decline since January.
But to put it in context, BofA private client buy flow data show tech is middle of the pack per 4 week cumulative flow.
What about positioning ?
Money manager has net short positioning of (-65K ) S&P per CFTC COT data. ( commitment of traders data from commodity Futures trading commission )
Net long during April indicates that everyone is positioning for long, market cannot gain if everyone is piling on one side of the boat, in fact market would decline if everyone tries on load their position on one side of the market, this is happening as recently as mid March - Mid April 2024, where money manager cut their short and increase their long bet of on S&P 500 futures)
And after they reduce their long and goes to short, then market start recovering and push to new ATH.
All in all, big boys position is a tad light and skeptical of committing themselves, therefore market may have room to go up further. ( to clarif, I am not telling to go all in, though June is likely to end up being a positive month, but in between, there could be some back&fill and retracement, so tread carefully from now till end of June )
Stagflationary ??
This chart shows why I don’t read financial media news, to paraphrase Jay Powell reply when asked about Stagflation, I don’t see the stag nor the flation.
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. No other instruments come close to it in terms of liquidity sensitivities. And this is why I dedicate a section to Bitcoin ( I look at it daily even when I am not writing any new blog entry )
Bitcoin daily chart
Bitcoin is currently above 20D and 50D MA ( sort of resting at 20D MA )
RSI above 50
if RSI is consistently above 50, BTC may have further to rise and possibly breach previous resistance at 73.8K.
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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