Stocks should be bottoming as June gets underway. US Treasury yields and the US Dollar both should be on the verge of turning down more sharply in the days/weeks ahead which might coincide with less inflationary economic data over the next couple weeks. (May proved to be the best month for Treasuries all year.) Overall, bullish June seasonality in Election years combined with a cyclical bottom following lack of material technical deterioration spells opportunity for US Equities in the month of June.
Tuesday’s JOLTS data proved to be another catalyst which has coincided with weakness in Treasury yields and the US Dollar, and conversely, strength in the stock market. Tuesday’s print of 8.059 million(mm) jobs missed expectations of 8.350 mm Jobs expected, marking the lowest level of jobs since February 2021.
2, 5, 10 and 30-year yields pulled back sharply to levels right near May lows, which is the technical support barrier which when violated, should result in a much sharper broad-based rally.
While the initial “bad news” failed to immediately prove to be “good news” for the US Stock market, prices pushed higher by Tuesday’s close, marking four straight sessions of closing well up off the lows following early weakness.
As discussed yesterday with the SPX, the two key areas to pay attention to are 5302 and then 5342. Until both are exceeded, which likely will depend on a break of 4.31% by TNX and the 104 level by DXY, further choppiness very well could happen in the near-term.
Any break of Monday’s mid-day lows of 5234 arguably would postpone an immediate rally, allowing first for a test of either 5210, or 5185 with a maximum level of support near 5153.
However, downside should prove limited, and it’s right to remain bullish, expecting an eventual push back to new highs.
S&P 500
Cruise-liners turn up sharply as Oil continues lower
One key catalyst which hasn’t been discussed much is the effect of lower oil prices on Cruise-liners and Airlines as the unofficial start to Summer has gotten underway.
Charts of key Cruise-liner stocks like CCL -0.85% and NCLH -0.45% broke out of well-defined bases on Tuesday while stocks like RCL 0.09% furthered gains at all-time high territory.
While RCL looks like the clear leader in the space, CCL’s breakout of its five-month downtrend likely helps this accelerate up to near $20 which has marked a peak in the stock on two separate occasions since last Summer.
This looks like an important technical development that’s helping to spur on relative strength out of the Consumer Discretionary sector which I discussed last week.
I expect that Consumer Discretionary has taken the lead (outside of Technology) in starting a broader-based rally in US stocks, and the Cruise-lining stocks, which have been laggards over the last year, finally look to be “coming back to life”.
Airlines still look like short-term Laggards
While the Cruise-liners have been strengthening, there hasn’t been the same degree of strength in either the Casino stocks, or the Airlines, even though the latter should also eventually be a beneficiary of Summer travel along with lower WTI Crude oil prices.
The chart of JETS 0.15% , the U.S. Global Jets ETF, a diversified ETF of various Airlines stocks, has largely been range-bound for nearly two years, despite the overall level of volatility.
Delta (DAL -0.49% ) is a relative strength leader in the space, but the recent decline on heavy volume of stocks like AAL 0.18% is a technical concern and likely prevents this from immediately rebounding.
Other Airline names like JBLU, UAL, ALK, and LUV remain quite range-bound, and in many cases, trending lower from peaks made back in 2021.
The ETF JETS will require a weekly close back over $22 to think this is starting to turn higher, which should lift this up to $26 initially. Until that time, both the Casino names and the aforementioned Cruise-liners look more technically attractive.
India’s ETF decline likely results in further near-term consolidation but should ultimately prove short-lived
Despite the recent decline in the US Dollar index, several of the former relative strength leaders among the Emerging market space have been hit hard lately on election concerns.
Mexico’s EWW -1.12% fell more than 10% on Monday, and Tuesday brought about a sharp decline in India’s SENSEX index as Indian Prime Minister Narendra Modi’s ruling party looks poised to lose its majority in parliament.
A weekly chart of the MSCI India ETF by iShares shows the current bearish engulfing pattern now on INDA 0.04% with three more days in the week.
Barring an immediate snapback, which looks unlikely, further near-term selling might occur which could result in INDA pulling back to the high $40’s.
Interestingly enough, this decline in two of the best technical performers within the Entire Emerging market space has happened just as the US Dollar index is on the verge of a larger breakdown.
Thus, short-term election-related selling in both Mexico and also Indian Equity ETF’s like INDA 0.04% (shown below) are likely to prove short-lived and buyable over the next week.
Given the intermediate-term uptrend still very much in place, any short-term pullback should help alleviate near-term overbought conditions and provide for a more attractive opportunity in the month of June.
Technically speaking, I view INDA as being attractive on any dip under $50 in the week(s) to come. This looks to be a short-term setback only, and INDA should rally as the US Dollar starts to potentially continue weakening in the months to come.
