Daily market review June 13, 2024 (Semi’s and Nasdaq are positive while the rest are “flatlining”, Market is pricing in 2 rate cut as of June 13 despite Indication of 1 rate cut from June 12 Fed Dot P
Broad market overview
Semi gain of 1.57% is leading the cap-weighted indices slightly higher, Nasdaq 100 gain 0.57%.
While the rest of the indices are either stalling or falling, with Small cap and Transportation losing 1%.
Overall, Cap weighted indices outperform equal weighted counterpart, Mid&small cap.
If you are itching to get in the market now, Establishing long here is not advisable because risk-rewards ratio is not favourable, especially for those with a shorter holding time frame. Incremental gains may still come in amidst the backing and filling in the next few days.
S&P 500 11 sectors overview
Technology and real estates are the top-ranking sectors, while Energy and industrials are the bottom ranking sectors.
MOVE index
Move index is currently at 91.93, ( bond price implied volatility is expected to be around 9.19% per annum. ) Lower MOVE indicates 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
More Decliners than Advancers, occurring at lower volume than previous week, as expected after the all important CPI + fed meeting Wednesday.
FYI, after Memorial day holiday, volume will decline gradually heading into the summer season.
On June 12 2024,
1.69 to 1 NYSE Decliner to Advancer ratio (1718/1018 )
1.89 to 1 Nasdaq Decliner to Advancer ratio (2778/1471 )
% of stock above 20Day, 50Day, 200Day
Breadth is still stalling.
Market is still led by a few leaders, and only 1/3 of the S&P 500 stocks are keeping their head above 20D MA
% of SPX stock above 20D MA : 37.6%
% of SPX stock above 50Day MA : 47.2%
% of SPX stock above 200Day MA : 68.6%
Dollar index and 10-year Yield
10-Year yield is at 4.24% while Dollar index is at 105 ish level
10-Year yield is currently below the horizontal support line around 4.24% , and is expected to drop further in the coming days.
Similarly, for Dollar index, it is expected to go down towards previous swing low of 102.5. Rolling over of both 10-Year yield and dollar index is expected to provide support to stock market rally in the coming days.
Large cap market rally is guaranteed with the fall in both 10-year yield and dollar index. But for small and mid cap, they will require a Fed rate cut to achieve a sustained rally and a true breakout from their respective base .
Exceptionally huge Dollar aggregated long positioning
Charts shows multi-year high aggregated long positioning in USD, if the longs decline from this high level, then it will be huge headwind for Long dollar and huge tailwind for stocks and commodities
Market adage, don’t fight the fed, don’t fight the market
But what if market is fighting the fed ? who should you listen to ?
General rule of thumb, in most cases I would still lean towards market weightings and assessment ( rather than Fed )
In this case, I am leaning towards market weighting of rate cut possibilities. Because as of June 13th, market is pricing in 2 cuts by end of 2024 vs Latest June Fed Dot plot of 1 rate cut
Because of the following reasons,
1) Fed chair Powell has mentioned in several press conference that job market weakness warrant a policy response
2) Fed chair Powell acknowledge on June 11 post meeting press conference that job no. has been inflated ( market consensus and based on the Bloomberk 700K inflated non farm job no. in entire year of 2023, as mentioned in one of my previous market review entry )
3) Latest unemployment claim was higher than expected ( June 13th 2024, 242K actual vs 225K expectation )
Market Price in 1 x 25 basis point rate cut in September 2024
Market Price in 1 x 25 basis point rate cut in December 2024 (so a total of 2 x 25 basis point cut in fed fund rate )
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 currently between 20D and 50D MA (testing 50D MA)
BTC RSI is at 46 ish level
if BTC does not bounce from 50D MA and get back above 50 RSI level soon, then BTC may retest previous swing low at 60K again.
If the market bounce back in the next 1-3 days, only then can we declare that the immediate danger is over.
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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