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7/6/22 Risk-On Rockets With Recession Warnings Flashing

News:

The market went on a ride yesterday. After gapping down about 2% at the open 3 of 4 major indexes closed the day in positive territory.

The lone loser was the Dow, which fell 0.4%.

Leading the way higher was the Nasdaq. After turning positive mid-day it charged ahead for a gain of 1.7%.

Under the surface, the picture wasn’t as pretty…

Only 3 of 11 sectors also finished green.


Image from Finviz

You can see the clear divide with riskier sectors, Technology, Communications, and Consumer Discretionary advancing…

The Energy sector was the day’s big loser … Commodities fell too.

  • Oil closed below $100 per barrel for the first time in about two months.
  • Gold is trading at its lowest level in 2022.
  • The price of Copper dropped to 19-month lows.

But for risk-on stocks, the mood was remarkably positive. The divide between advanced and decliners was even.

The buying was focused on growth plays…

  • Alphabet (GOOG) rose 4.4%
  • Meta (META) climbed 5.1%
  • Amazon (AMZN) added 3.6%
  • Bitcoin^ is trading more than 4% above its low point on Tuesday

But recession fears are still looming large…

Technicals:

The bond market flashed its classic recession sign again.

The 2-year bond settled just above the 10-year. This is known as an “inversion.”

Yesterday’s inversion is the second one of the year. The first was on April 5.


Chart via CNBC

Just bear in mind that bond yield inversions don’t cause recessions … falling demand does.

Click here to read our opinion on the inversion. We stand by what we wrote in April.

The other signal we’re watching is commodity prices. They’re falling. 

We’ve got some perspective for you up next…

Timing:

Copper fell into a bear market in late June. “Copper has entered a bear market before every recession in the last 30 years.”

The price of copper does reflect slowing demand.

Slowing demand can cause recessions.

But the most significant economic driver right now is The Fed.

Today’s headlines will likely be dominated by the FOMC minutes. Those are set for release at 2 p.m.

Don’t try to read them in real-time … Just watch how the market reacts.

We’ll have a summary for you in the morning.

Watchlist:

*Low Float
^Open Position

*TOUR has resistance at $1.40
*FNKO has support at $22, resistance at $25
^CBIO has support at $1.60
CHEF has support at $38, resistance at $42
^ALT has support at $12
CELH has support at $70
OPTN has resistance at $4
LI has support at $37.50
CD has support at $8
SGEN has resistance at $180

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