Good morning,
There’s a lot going on right now, so I’m going to resist the urge to cram my thoughts on everything into today’s editorial.
At a high level, the base case remains equities will rally and be higher at year-end. The first section of today’s report includes 3 important reasons why last week’s 2% drop isn’t cause for alarm.
However, this market deserves some nuance and warrants more than just a view of the S&P 500. As last week’s Playbook and Stock Trends reports have highlighted, there are plenty of stocks outright breaking down. Healthcare was a big contributor there last week, but semiconductors are what we should be watching this week with Nvidia’s earnings report on Wednesday.
The chart can’t predict the reaction but as of now, the technicals for NVDA are strong. As for the reaction, this week’s level to watch is $141.
If we’re above that this time next week, it’s bullish for semis and the market. If we’re below that level, the risk is for more downside and the market’s most important stock joining many of its peers in heading materially lower.
The other major risk I’m watching is the dollar. DXY broke out to 52-week highs last week, a headwind to equities even though its rally has recently been ignored. A continued move higher is one of the biggest tactical risks to stocks.
However, the dollar trade is closely related to yields which I still believe are near a top. We’ll know quickly if we’re wrong, but today’s Playbook explores potential opportunities in bonds, small caps, utilities, and real estate.
We’ll also review:
3 reasons to not sweat last week’s decline
Technicals for the USD dollar and major indexes
The state of fixed income
Gold, oil, and energy stocks
Foreign equities
and more!
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