This Market Indicator Has Never Been Wrong- June 12 to June 16
June 12-June 16, 2023 by Adit Dayal for RIPPYGLOBAL.
Happy Sunday everyone and welcome back to the Rippy Global weekly outlook. The market consolidated and then ended the week with a short lived breakout to the upside with large moves in many growth names as well.
The market has continued higher, rampantly, for the last four weeks- most importantly closing 20% above market lows setting us into a new bull market. Here’s what history says will happen next.
In 67 years this indicator has not been wrong, and while history doesn’t repeat itself, a famous market saying tells us that it may rhyme. Over the next 12 months stocks have never been lower, and they haven’t been higher by a short amount either, usually up another 28.2% in the following 12 months!
Another data point here is interesting - if the S&P 500 trades at least 7% higher after the first 100 days of trading, all 26 times the S&P 500 closes the year with a positive return. 2023 will be the 27th time this happens.
This week was the Fed blackout period but there is a meeting this week which should move markets as well as the May CPI number. The central bank is expected to pause is tightening for the first time in a while and Bloomberg is reporting that the options market is showing the biggest bias towards call options vs. puts in 15 months.
Quincy Krosby, chief global strategist at LPL Financial states that “If we see more interest in small caps and financials, it will be a telling sign that investors are more comfortable about where the economy is headed.” Therefore I am especially keeping an eye on that sector.
Large news sites continue to cite AI and generative AI (like ChatGPT) as the reason for this huge push of growth into the markets recently. Needham released a report about how AI will increase efficiency and impact certain companies margins and EPS. They listed a few specific names that can benefit and why. Some names are GENI (used in sports broadcasts), COMP and RDFN (real estate), and TBLA. I’d keep these names on watch for bounces over the next few weeks.
#1) Earnings this week is very light and I am not watching anything in specific. One thing is Adobe, which released an AI PR last week ahead of earnings which some may see as a red flag in order to pump the stock price up.
#2) On Monday, CRM is holding their AI day event.
#3) On Tuesday, the May CPI inflation number will release and headline CPI is expected to gain 4.1% YoY.
#4) On Wednesday, the May PPI inflation number will release with a forecasted drop of 0.1%.
The risk in the market is that the Fed cannot pause tightening due to higher than expected inflation numbers.
#5) On Friday, it is quad witching so expect increased volatility.
The S&P 500 ($SPX index) broke out last week but closed weak. I am looking for a cool off week after 4 straight weeks up.
My key breaks are $4298 for bulls and $4240 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
Tesla made the move I have been talking about in previous articles, violently running up and blowing out shorts. I’m watching the $234 gap fill level as a point of bounce after a bit of consolidation.
Apple is right at this huge weekly supply level which has been rejected heavy and many times since 2021. I do think that if the overall market breaks out then this may go to $210 which is the Goldman Sachs’s price target.
GS just broke out of this pennant and printed a bullish hammer candle on Friday. The financial sector also saw good call activity.
In terms of insider trades, LXRX is a biotech which has sold off and TMC is another cheap penny with a huge insider trade.
High Short Interest Stocks (MarketWatch)
#1 - CVNA 57% SI
#2 - ALLO 52% SI
#3 - BYND 46% SI
#4- EH 45% SI
#5 - BIG 41% SI
Top Options Trades on Friday
Biotech Stocks Catalyst Watch
- DBVT - Peanut Allergy Phase 3 Review
- ABBV, IRWD -PDUFA June 14th
- ALBO, BMY, LIAN - PDUFA June 16th
Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)
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