Market’s Ode to Central Banks

I’ll give you the sun
The rain
The moon
The stars and the mountains
I’ll give you the world
And all that you wish for
L.A. Reid & Babyface 1989

Tomorrow, the ECB meets.

We are standing by expecting a dovish Draghi (and Lagarde) to show up.

Furthermore, next week the Federal Reserve meets.

Expectations are for a ¼% rate cut.

However, with the U.S. rates higher than pretty much anywhere else, suddenly, our debt (and dollar) look more attractive, especially given the new all-time highs today in the S&P 500, NASDAQ 100 and Semiconductors.

Even with the weak PMI manufacturing numbers (weakest in 10 years), the U.S. market, particularly our slacking Economic Modern Family members, all partied today.

As I walked the hiking path towards the sun and the moon mountains in Santa Fe, with the threat of rain in the distant clouds, I sang this old R&B tune.

The song goes on to say,

I’ll give you everything
and more
All that I’ve got–it’s yours
I’ll give you everything
All that you’re looking for

Is this why the Economic Modern Family is rallying?

Before we go through the weekly charts, a quick comment about commodities.

Gold, silver, steel, aluminum, sugar, and wood all gained along with the market.

Are they sensing inflation? Even with the stronger dollar, these key commodities reflect the idea of rising raw material prices that can lead to inflation.

Sugar might be the best instrument to watch for inflationary market sentiment.

Looking at the Modern Family, most made huge technical strides today.

The Russell 2000 IWM put distance between it and the 50-WMA (blue ling). It still has a long way to go to match SPY and QQQs.

Regional Banks KRE traded right up to its 50-WMA. I’ve said that when KRE gets to its 50-WMA, the top could be in. Best evidence of that will be whether it clears it or not by the end of the day Friday.

Transportation IYT continues to trade well, but still inside last week’s trading range.

Retail XRT rallied nearly 2%. But it needs to rally way more.

Biotechnology IBB did not do very much. In fact, IBB cares little about the Fed right now.

And Semiconductors SMH made new all-time highs today. Unless it breaks 119, it looks great. However, it is now in overbought territory.

Ultimately, both stocks and commodities are singing to the central banks,

And that’s for sure
I’d climb the highest hill, cross the widest sea
Nothin’ could discourage me
And I pray that you’ll be always there for me
Forevermore

S&P 500 (SPY) 301.44 the ATH. 300.07 now pivotal

Russell 2000 (IWM) High volume rally of about 1.5%. 158.03 the July 1 resistance. Support at 155.35.

Dow (DIA) 273.99 all-time high. 270.80 pivotal support

Nasdaq (QQQ) New ATH at 195.16. 194 now the pivotal support

KRE (Regional Banks) Cleared the 50-WMA today which makes 54.62 the place for this to hold or not by week’s end.

SMH (Semiconductors) New ATH at 123.56 today. 120.71 now pivotal support.

IYT (Transportation) 195.65 the high from 7/16 to clear. 194 first pivotal support then 192.40.

IBB (Biotechnology) 105.20 the 50-DMA pivotal support.

XRT (Retail) I’ll be looking for this to close above or below 43.12 a sign of more strength or not.