Huge day in yesterday across the board, every sector except energy was up. The markets are mixed this morning, DOW FUT up 0.14%, S&P up 0.08%, NAS down 0.01%, Gold up 0.45%, Oil up 0.96% after a horrible day yesterday, and the US 10yr down 3bps @3.23%. Asian markets were mixed with the Nikkei rising 2% but the Hang Sheng falling 1%. European markets are also mixed this morning ahead of the ECB rate hike decision coming out at 8:15, markets are indicating ~90% chance of a 75bps move. In the US not a ton on the economic news front, jobless numbers come out at 8:30, Powell and Fed’s Evans and Kashkari all are speaking today, and the DOE inventories are out this morning at 11am.
Yesterday’s big day came with a 5 to 1 adv/dec and the percentage of stocks that are above their 50dma is at 49%. However, yesterdays move came with average volume, new highs to lows were -9 to 1 and the percentage of S&P stocks at a 20-day high sits at just 1.39%. We are hopeful that the internals will continue to repair but we are skeptical with the data we are seeing now. Interestingly, both equal infotech relative to the equal S&P and QQQ relative to equal S&P both made new lows yesterday. This makes us think that these areas of the market are still weak and should be sold on strength.
Energy was a disaster yesterday with WTI down 5%, the 50dma has crossed below the 200dma, the scary death cross! Energy stocks were not down nearly as much as the commodity yesterday and based on our work, E&Ps are pricing in $70 WTI for 2023. Even after the huge pullback in WTI, 85% and 90% of the energy sector is above their respective 200dma and 50dma. Energy came into the year in a position of leadership, it has lead most of the year and our bet is that it will continue to outperform. The other area that is a very similar story it equal utilities. The sector relative to the equal spx just broke out of a double top resistance and has made multi year highs and 96% of the utilities index are above their 200dma. The sector is nearing overbought conditions, but it is another sector that we see continuing its leadership.
Market News: Liz Truss announced a cap on energy bills in the UK sending UK nat gas down by nearly 6%. She also lifted the ban on fracking, wonder how this will work if there is a cap on how much energy can cost. Putin said that he will let Europe freeze if these sanctions stay in place. The US open match went until 2:50am ending in a nail biter. Kim Kardashian launched a private equity firm, certainly a recession indicator. BOC raised interest rates by 75bps and see more hikes ahead. The Fed’s beige book showed a bleak outlook. Apple launched a bunch of new products including the iPhone 14, they did not rise the price of the phone in an attempt to take more market share. Hurricane Tracker: The hurricane off Baja, Kay, made landfall this morning and is expected to stay around until Saturday, the hurricane off the Bahamas (Earl) is set to generate swell around Bermuda but not too much more, the hurricane headed for Europe (Danielle) is set to be around Portugal by Tuesday and there is now one storm with a 60% chance of becoming a tropical storm in the middle of the Atlantic.