Afternoon Update

12Jul

Since the last update, the S&P 500 Health Care sector (-0.35%) joined Industrials (-0.2%) and slipped into negative territory recently, but we still have 9 of 11 S&P sectors green.

I’m not trying to say that today wasn’t a decent day for the market, but when considering everything in context — the extent of the decline in Treasury yields and the U.S. Dollar, and one of the most dovish Fed official comments in 16 months — and you have a majority of major market averages that are near or starting breakouts, you don’t really want to see these kinds of daily price candles on such a day (keeping in mind these charts are captured before the close)…

SP-500 (current daily)

Dow Industrial Average

NASDAQ-100

I’ll lay this out in tonight’s Daily Wrap in a clear and concise way. The key word for today is, “Context”. And the key moving forward is not the fight against inflation, it’s what’s coming next (hint – the lagged effect of monetary policy is about to hit the real economy with exponential tightening).  As Wayne Gretzky — who has been called the greatest ice hockey player ever — once said, “I skate to where the puck is going to be, not where it has been”.

I still don’t think now is the time to jump in and short the market with both hands and feet. I do think it’s a time to back off on chasing risk, it’s a time to take profits on long position gains if you have them, or perhaps tighten trailing stops. I think it’s a time to pay attention to where money — which is like water, it will find some place to go — is headed next. I think it’s a time to take everything in and start making action plans. One of my own personal difficult lessons I’ve had to learn over and over again over many years is that you can’t force anything. The market calls the shots, no matter how much conviction you might have, no matter how right you may eventually be, timing is essential. For me, patience has always been my biggest struggle when I see things aligning as I expected. I’ve been right so many times on what comes next, but wrong in my execution, and usually because I didn’t have enough discipline or show enough patience.

Looking ahead to Thursday, market participants will receive the following economic data:

  • 8:30 ET: Weekly Initial Claims (prior 248,000), Continuing Claims (prior 1.720 mln), June PPI (prior -0.3%), and Core PPI (prior 0.2%)
  • 10:30 ET: Weekly natural gas inventories (prior +72 bcf)
  • 14:00 ET: June Treasury Budget (prior -$240.30 bln)