Good Afternoon REBELS! 

Metals and Miners have outpaced the recovery in technology from the Leo low.  Over the last 3 weeks, metals are up over 18%. In the graph below, we can see that XLK +5.8% beat out the rest of the broad market that was in general recovery with an awesome bounce.  This was assisted by new money from the new month!  As always, a top down approach takes a little work to analyze the stocks inside these ETFs to see if trends are sustainable.  There really wasn’t a sector that was sold into.  Maybe utilities and energy with what was going on in Iran, but nothing worth exploring from a price movement perspective.

 

Note: Click on Charts to see a larger view!

 

XME

This ETF holds 82% in metals and mining and 18% in energy( just 6 stocks). All 6 of the energy names were up on the  week. Their outlook looks positive with bullish seasonality on every name. The metals found a bid early and this may have more to do with nervousness in the FX markets around currency manipulation from Japan & US.  All of the miners were positive and some did better than others based on their primary metals.  Some of the bigger names have reached short term overbought, but historically, when these trends finally turn and move they tend to stay in that direction.

GLD

A little trend analysis after GLD becomes overbought.  We can see the last 6 times that gold can continue to push higher even with some modest pullbacks in the RSI to the 50 line.  The ETF is not overbought yet, but some of the individual names are so it may be time to get in a roll!

QQQ Top 10

We had a nice follow through in the market on Monday and Tuesday in tech.  On Wednesday, the QQQ gapped higher was closed lower only to have a big gap down on Thursday that was bought.  We were not able to retake the highs in the QQQ on the week while SPY, DIA, IWM all made new all time highs on the week.  QQQ, SMH, XLK, XLC are all still  lagging the broader market.  This suggests that breadth has picked up.  This also provides an incredible catalyst if the market starts to push the SMH back through the 50 sma.  It is still 90 points off of its high.  The opposite should also be taken into consideration.  Tech led the market up and if we continue to see weakness, how much further can the market go if tech fails to rally or even worse moves lower.

SEMICONDUCTORS

The first chart is of the prior week to see what moved within the sector.  It does not include all of the names, just the top 20 in the SMH. The standouts are MRVL at the top and WDC at the bottom from earnings!

A year to date chart paints a crazy picture. Memory names helped drive SMH higher with SNDK still up roughly 400% on the year and only a couple names like QCOM and SKHY down small on the year.  Now that the deleveraging has wiped out South Korea investors and Leo’s Situational Awareness Fund, can the memory names have the same type of speculative capital needed to push them back to highs?  Demand for memory has not stopped and supply has not increased in any way yet to make a difference.  AAPL looking at CMXT memory because it is cheaper, so we could see AAPL make a deal there if the current administration allows it.  The next area investors have been pushing is photonics. This sub-sector aims to replace copper wire with high-speed optical connections.

 

PHOTONICS

The photonics sub-sector had a pretty wild week.  AAOI had earnings and COHR is due out on the 12th.

On the year, they are having some incredible moves as the AI battle continues to try to improve their tech stack offerings. Most of these names have higher implied volatilities and wider markets.

SOFTWARE (IGV)

IGV had two stocks that stood out, one for good and one bad. PLTR with a gap up early in the week on earnings while the market did not like APP’s earnings on Wednesday night. ORCL, CRWD, PANW, & NOW all had nice gains on the week.

 

MIDTERM SEASONALITY 

Still leaving this in here for obvious reasons!

VIX 

Closed at 14.9!!! This is the lowest low since January 9th!  This may be an area where you can position an IV purchase as protection.  Keep in mind that VIX options are based off of the baseline future.  VIX options are more expensive as you go further out in time due to the uncertainty in the markets!  If you do buy calls or call spreads they will moved based on that futures movement not the near term!

EARNINGS CALENDAR

Before Market(B- Orange), Aftermarket (A-White Background)

ECONOMIC CALENDAR

All sourced from TradetheNews.com

Monday:
11:30EDT/16:30BST US Treasury’s 3 and 6 Month Bill Auction – Source TradeTheNews.com

Tuesday:
06:00EDT/11:00BST US Jul NFIB Small Business Optimism
08:15EDT/13:15BST US Weekly ADP Employment Change
08:55EDT/13:55BST US Redbook Retail Sales
10:00EDT/15:00BST US Jul Existing Home Sales
11:00EDT/16:00BST US Treasury’s 4 and 8 Week Bill Announcement
13:00EDT/18:00BST US Treasury’s 3 Year Note Auction
16:30EDT/21:30BST API Crude Oil/Gasoline/Distillate Inventories

Wednesday:
07:00EDT/12:00BST US MBA Mortgage Applications
08:30EDT/13:30BST US Jul CPI; Core CPI; CPI Index; Core CPI Index
10:30EDT/15:30BST DoE Crude Oil/Gasoline/Distillate Inventories
12:00EDT/17:00BST USDA Agriculture Crop Production Report
12:00EDT/17:00BST USDA WASDE Report
13:00EDT/18:00BST US Treasury’s 10 Year Note Auction
14:00EDT/19:00BST US Jul Federal Budget Balance

Thursday:
08:15EDT/13:15BST US Cleveland Fed’s Beth Hammack (Voter)
08:30EDT/13:30BST US Continuing/Initial Jobless Claims
08:30EDT/13:30BST US Jul PPI Final Demand; PPI Ex-Food & Energy; PPI Ex-Food, Energy & Trade
08:40EDT/13:40BST US Richmond Fed’s Thomas Barkin (Non-Voter)
10:30EDT/15:30BST DoE Natural Gas Inventories
11:00EDT/16:00BST US Treasury’s 3 and 6 Month Bill Announcement
11:00EDT/16:00BST US Treasury’s TIPS and Bond Announcement
11:30EDT/16:30BST US Treasury’s 4 and 8 Week Bill Auction
13:00EDT/18:00BST US Treasury’s 30 Year Bond Auction 

Friday:
08:30EDT/13:30BST US Jul Advance Retail Sales; Retail Sales Ex-Auto; Retail Sales Ex-Auto & Gas; Retail Sales Control Group
10:00EDT/15:00BST US Q3 Philly Fed Survey of Professional Forecasters
10:00EDT/15:00BST US Aug Preliminary U of Michigan Sentiment; U of Michigan Current Conditions; U of Michigan Expectations; U of Michigan 1 Year Inflation; U of Michigan 5-10 Year Inflation
10:00EDT/15:00BST US Jun Business Inventories

MACRO MEASURE from WAYNE RAZZI

Click image below to watch video!

 

LEVELS – LARGE ETFS from @RYANMASTRO5

The week ahead:

After making record highs in the SPY, DIA and IWM we could see a market that starts to trade back into a normal volume profile.  We had unusual amount of calls drive the market higher last week(gamma squeeze) after the Leo low.  We need tech to broadly engage and we need speculative money to continue to flow to keep this market afloat.  Earnings will come into play this week as the last big week of this cycle.  We still have some big names lingering out there like NVDA on 8/26, but the quantity of names drops significantly after this week.

We do have several bond auctions that could provide some insights into how investors are feeling about inflation and current interest rates.  The FX market, mainly Japan’s attempt to strengthen the the Yen could start to play a bigger factor in the carry trade unwind.  A serious unwind of the carry trades would be bearish for the broad market.  Over leveraged funds could be forced to liquidate in the same manner we saw South Korea deleverage with margin calls.  Any increase in margin requirements at brokerage houses could paint a clear picture of concern companies that are over leveraged.

Traders could react to CPI, PPI this week on Wednesday and Thursday as the potential for a rate-hike fell sharply for September as jobs were mixed last week with cooling hawkish market pressures.

With VIX low, trading options has never been better!  Good luck this week!

Good Luck this Week!