D&D Note (6.21.2022) ~ Markets Rally Off Oversold Conditions & Bitcoin Stabilization ~
With markets closed yesterday in the US for Juneteenth it was Bitcoin that stole the show and directed market futures on wild swings with nearly a correlation of 1 (meaning all assets moved together).
Bitcoin dropped as low as $17,663 on Saturday before rallying back above $20,000. With Bitcoin rallying that helped US stock futures to rally off oversold conditions from last weeks selloff and markets gapped up to open todays session.
Todays stock rally certainly feels like a dead cat bounce and one that will get faded as we head through the week. There simply wasn’t enough volume today to make this a convincing rally.
The 200 week moving average on the S&P 500 is 3500, which looks to be where the market wants to trade down to before bouncing sustainably.
There have been 11 Bear Market Bounces of 2%+ this year and so far all have been failed rallies.
D&D beat the markets today up over 3% led by COIN up 12.55%, RIVN up 10.78%, TSLA up 9.37%, UNH up 6.38%, PANW up 5.04%, TRGP up 4.64%, DVN up 4.36%, NVDA up 4.31%.
The consensus from economists is that while chances have raised for a recession this year the probability remains for a recession hitting next year. Economists also feel that a recession won’t be deep like 2002 or 2009 and rather a mild one like in 1994.
Mike Wilson of Morgan Stanley says only a mild recession is priced into the market, and we would need to see another 15% to 20% down to around 3000 on the S&P 500 to fully price in a recession.
Tomorrow FED Chair J. Powell testifies in front of the Senate.
Lifting the China Tariffs would cut inflation by 1% and help President Biden in midterms according to former Ambassador David Adelman. Cutting tariffs is one of the silver bullets this administration has to tame inflation.
Stock Specific News:
Kellogg plans to split company into three separate companies, the stock finished up 1.95%
Docusign CEO Dan Springer steps down, the stock dropping -1.65%.
Twitter deal still hinging on 3 issues according to Elon Musk being 1) fake accounts, 2) debt financing, 3) shareholder approval. Shares of Twitter finished up 2.99%.
Uber is restarting shared rides in New York City and San Francisco, the stock fell today -0.23%.
Mondelez to buy energy bar company Clif Bar for $3 billion, the stock gained 1.73%.
Market Knowledge Tip:
Diversify your market news resources.
Don’t just rely on one source but rather find multiple sources to aggregate into a consensus opinion.
Your local paper is bias to your local region. Your national news is biased to your country. Take not just local, not just national, but global news. Definitely don’t get investing news from social media or YouTube.
You might not care what Chinese or Japanese investors (for example) think about the US markets, but those investors also invest in US markets. Specifically when it comes to China and Japan they are the largest holders of US sovereign bonds outside of the United States.
Closing Markets (as of 1:15pm PST)
DOW up 2.15%
S&P 500 up 2.45% (3,764.79)
NASDAQ up 2.51%
VIX down -2.71% to 30.19
2 Year Note up 1.57bp to 3.20%
10 Year Note up 7.59bp to 3.30%
Oil up 0.931% to $110.58 a barrel.
Gold down -0.451% to $1832.30 an ounce.
Bitcoin up 3.86% to $20,839.87
Ethereum up 1.20% to $1,118.65
~ Dave James / Principal Trader and Market Strategist