Mid-Day Update – 6/14/2021

Not much to report mid-day, except that tech is holding everything together by a string with superglue. Materials (XLB), Financials (XLF), Industrials(XLI), Transports (IYT), Energy (XLE), Consumer Staples (XLP), and the Dow Industrials themselves (DIA) are all tucked under their important, 21-day lines. That is less than ideal. The Energy sector is notable because oil prices actually hit new, post-pandemic highs earlier today.

Tech (XLK) and real estate (XLRE) are the only positive of 11 S&P 500 sectors. The XLU (Utilities) is only slightly negative. I look at XLRE and XLU as defensive. Even the IWM (Small Caps) are negative mid-day. Tech is responding to the current pairs trade with treasuries – at least that might be a plausible explanation as to why it rides alone in the “risk-on” wilderness today.

Man cannot live by tech alone – except right after the Wuhan Lab-Leaked China-Virus with the massive, dubiously-tested, dangerous vaccine experiment underway. I am less than serious about the last sentence but wondered if I could get all the offensive language in a single sentence to trigger our new, communist censors out there, about whom I could care less.

Back to the issues at hand, what are the sectors telling us today? Not the Monday the bulls had hoped for. It is now up to the bears to press their case, starting with taking out swing lows in the aforementioned sectors, rather than just the 21-day lines. Absent that, we lean more and more to the trading range scenario I have been forecasting on the daily charts.

Otherwise, perhaps the market will mark time until Wednesday’s FOMC announcement. And while there is no expectation of a rate change, it sure seems possible that the Fed will announce some QE tapering – why else would the market be so shy here? I mean, someone always knows. There are always insiders. Perhaps that explains why last week’s inflation report didn’t give the S&P 500 enough thrust to move out of the range.

We are at a point where I will consider shorting rallies, even on a swing basis. But for now, let’s see how we close. 

Thus far, the downdraft is orderly, and the bottom may be rounding to move higher in the afternoon drive, but my bias shifts to negative if we close under the cluster of support in my morning update ranging from the hourly 21-EMA at 4234 all the way down to the 5-day EMA at 4229. Incidentally, the Navigator Algo Trigger line sits at 4233. A close below that is a bull case deal killer for me.

A.F. Thornton