Daily Summary – September 13, 2021 - SPX Second-Half Comeback Avoids Sixth Straight Loss

Daily Summary – September 13, 2021 - SPX Second-Half Comeback Avoids Sixth Straight Loss

Please excuse typos. As a side note, after talking with some followers, I'm going to try to make this a little more digestible for those who are not as familiar with the markets, lingo, etc. Feel free to leave your thoughts in the comments section, they are appreciated. Also, don't discuss crypto much as I'm still not that familiar with it.

Also starting a small glossary to help.

SPX = S&P 500 Naz = Nasdaq CompositeNDX = Nasdaq 100 (100 largest stocks in the Naz)RUT = Russell 2000 (smaller stocks) DMA = Daily Moving Average (the moving average over the given time period (20, 50, 100, 200 days normally)).MACD = Moving Average Convergence Divergence (basically a trend indicator)RSI = Relative Strength Index (basically what it sounds like)

__________________________________________________________________

We noted this morning we were "due" for a green day on the SPX (a negative finish would have been the first 6 day losing streak since Feb 2020) and that's what we got, but not without a bit of minor drama in between with the SPX starting strongly up but giving up the early lead to find itself down with less than an hour to go before the close. But it was able to mount a final hour rally to move back into the green, finishing up a quarter of a percent (if you can't tell I watched a lot of football this weekend). I'm not surprised given the way we closed last week, the laundry list of issues I identified on Friday (we'll get back to those at the end), and the fact that it's options expiration week that we didn't just rocket higher, but I feel better about things than I did on Friday.

RUT also did well finishing up around six tenths. The growth side was weaker but nothing terrible with Naz and NDX finishing just under flat levels (a fourth consecutive down day for both).

Style box much more green today outside of those growth names. Surprised NDX not down more with large and mid-cap growth boxes down that much. Clear tilt to small caps.

And add RBC to the "watching for a pullback" camp.

Where they'll have plenty of company (only 31% think we won't get at least a 5% pullback the rest of the year (although I hate that they call that a "correction")).

As Kolanovic of JPM reaffirms his buy cyclicals call from the last couple of months.

Major Market Technicals

NDX and Naz both remained above their first major resistance (20-DMA) but they actually tested today (successfully). Any further weakness though puts them below. SPX fell back towards the 50-DMA as we surmised was likely on Friday before recovering but wasn't able to get above the 20-DMA. RUT just above 50-DMA but just below 100-DMA.

SPX Sector Flag

As you'd expect, much improved SPX sector flag today with seven solidly green sectors (two that were up just above the flatline) compared with none on Friday, although just two were up over 1% (energy and financials). No sector down more than two thirds of a percent with just two red sectors. Health care down for a third consecutive day.

SPX Sector Technicals Rankings

These are NOT necessarily in the order that I like them for investment but how their underlying technical fundamentals stack up. Going to keep playing with the groupings so bear with me. Started to bold changes.

- Sectors with good/ok technicals not stretched/overbought, above most resistance.

XLY - Discretionary - MACD go long, RSI neutral, above all moving averages.

XLC - Communications - MACD sell longs, RSI negative, above all moving averages. On watch for downgrade.

- Sectors with mediocre to poor technicals but above all/most resistance.

None.

- Sectors that look to have bottomed with positive technicals but below significant resistance.

None.

- Sectors regrouping (negative technicals, short-term downtrend, long-term still positive/uptrend).

XLK - Tech - MACD sell longs, RSI negative, below 20-DMA, Downgraded today.

XLRE - Real Estate - MACD sell longs, RSI negative, fell below 20-DMA.

XLP - Staples - MACD sell longs, RSI neutral, back under 20-DMA.

XLF - Financials - MACD sell longs, RSI negative. Below 20-DMA.

XLB - Materials - MACD sell longs, RSI negative, below multiple MA's.

XLI - Industrials - MACD sell longs, RSI neutral, below multiple MA's.

XLE - Energy - MACD cover shorts, RSI positive divergence, under multiple MA's. Will upgrade if it can get over $50 level (around 50 DMA).

XLV - Health care - MACD sell longs, RSI negative, fell below 20-DMA, just holding 50-DMA.

XLU - Utes - MACD sell longs, RSI negative, under 20-DMA. Downgraded today.

- Sectors in poor shape (and in intermediate or long term downtrends (so expect further weakness for a while)).

None.

Key Subsectors - SOX (semis), IYT (transp), XBI/IBB (bios), XHB (homebuilders), XRT (retail)

Semi's up again today up by 1% and transp up half that as it continues to hold the 200-DMA we wrote about last week. The rest were down led by IBB down -1.68%. Others were all down less than half percent.

Breadth

Breadth improved markedly today. On the NYSE 70% positive volume and 60% of issues. On a mildly green day that is excellent. Naz not bad either at 55% positive volume, 48% of issues. On a down day that's decent. So maybe seeing a glimmer of hope in breadth after a mostly very poor week last week.

Commodities/Currencies/Bonds

Bonds - Despite European yields pushing higher, yields in the US were slightly red with 10-year yields down less than a basis point at 1.324%. 2-year yield finished around flat levels as well at 0.213%.

Dollar (DXY) - Pushed higher in the morning but fell back to finish around flat levels at $92.618. So remains in a precarious technical position beneath the 50-DMA but technicals continue to turn more favorable but remain negative for now.

VIX - I thought on Friday it would run higher, and after opening down, it gave it a shot but fell back to close back below 20 at 19.37. That might have been all we're going to get.

Crude (/CL) - A lot of positive news flow in the morning (see the morning report) got WTI over the critical $70 mark as well as the 50-DMA that had capped it. We also got the RSI breakout I was asking for so this has every reason to run higher from here. Closed at $70.65.

As John Kemp updated us on positioning, noting in the week through last Wednesday that outside of European gas oil, there were modest changes with Brent, WTI, and diesel length increasing slightly and gasoline down a bit. This follows a big buying week the week before when positioning increased by 60mb. This keeps fund managers bullishly positioned at the 70th percentile with much of that concentrated in middle distillates.

LONDON, Sept 13 (Reuters) - Hedge fund managers purchased petroleum derivatives for the second week running, though buying was in small volumes in most contracts, with trading quiet around the end-of-summer holiday period.

Money managers bought the equivalent of another 16 million barrels in the six most important petroleum futures and options contracts in the week to Sept. 7 (https://tmsnrt.rs/2YT7oFC). The purchases built on 60 million barrels of buying the previous week, which was the second-largest volume this year, after Hurricane Ida disrupted oil production in the Gulf of Mexico.

The only significant change last week was substantial buying of European gas oil (+12 million barrels), building on large-scale buying the previous week (+21 million barrels). Elsewhere, there were only small purchases of Brent (+6 million), NYMEX and ICE WTI (+1 million) and U.S. diesel (+1 million), partially offset by small sales of U.S. gasoline (-4 million).

Portfolio managers remain moderately bullish towards oil, with a combined position of 753 million barrels (70th percentile for all weeks since 2013) and long positions outnumbering short ones by a ratio of 5.36:1 (72nd percentile). But much of the bullishness is concentrated in middle distillates, where long positions outnumber short ones by a ratio of 9.1:1, which is much higher than crude (5.3:1) or gasoline (2.8:1). Fund managers appear to be betting that manufacturing and freight will remain strong, even as the coronavirus resurgence continues to restrict cross-border aviation.

As firms continue to work through their backlog of DUC's. Once these are gone, well costs will go up as new wells are much more expensive then finishing DUC's. But there's still a huge backlog for now.

As Gulf production up to 56%, although TrStrm Nicholas may impact that somewhat (but it's more going to impact Corpus Christi which is a big refining and exporting hub (both oil and LNG) so it might show up there next week).

And 20mb SPR sale was bid out today with eight companies winning bids.

Nat Gas (/NG) - After a one-day consolidation up another 5% today to $5.186. Amazing. It's now up 25% since Aug 26th. Technicals remain positive but very overbought.

Gold (/GC) - Continues to struggle with the 50-DMA and 1800 level, finishing up just under those levels today at $1795. Technicals have turned back to bearish on daily chart but not terribly so.

Copper (/HG) - After Friday's big 3% up day gave back 2/3 of that today so remains between strong support and resistance. Daily technicals remain positive.

Aluminum - Now at 13-yr highs. BBG.

U.S. Data

Did reports on NY Fed Consumer Expectations for August and Consumer Credit for July.

August 2021 NY Fed Survey of Consumer Expectations - "Further Rise in Consumers’ Short- and Medium-Term Inflation Expectations"

August 2021 NY Fed Survey Of Consumer Expectations - "Further Rise In Consumers' Short- And Medium-Term Inflation Expectations"

US Consumer Credit (USD) Jun: 37.690B (est 23.000B; prev R 36.690B) - consumer credit pushed higher again in July but at a less aggressive pace

US Consumer Credit (USD) Jun: 37.690B (Est 23.000B; Prev R 36.690B) - Consumer Credit Pushed Higher Again In July But At A Less Aggressive Pace

Next 24

Big report tomorrow will be the August CPI report in the U.S. We'll also get NFIB for August.

Internationally, we'll get price and confidence data from Australia, Japanese July IP, UK employment, and Spanish CPI.

And earnings season continues to wind down. No major reports the rest of the week I don't think.

Overall

I mentioned this morning all the cross-currents going on. I gave a laundry list of issues on Friday, but it appears we have some better news on many of them. We appear to have fixed sentiment to some extent (if Helene Meisler's poll was any indication), breadth was much better today, news flow is also getting better, and VIX fell back under 20. And I also mentioned how the week of options expiration has generally been weak with a move to around the 50-DMA, which is just what we got today (see chart below).

So was that it for the pullback? Remains to be seen, but I feel better about moving higher from here than I did on Friday. As I've noted previously, I think we are still too early for anything big to the downside. I think that comes in October.

Misc.

Some other random stuff.

Repos remain a bit below $1.1T.

As next 3 weeks apparently will be important to watch for airline bookings.

And "the Quad" will get together for Biden's first WH summit next week. BBG.

And Lancet article from "prominent experts" comes out with a statement that boosters are unnecessary. Story from BBG.

To see more content, including summaries of most major U.S. economic reports and my morning and nightly updates go to Cbus Neil's Blog Posts for more recent or Sethi Associates for the full history.