S&P 500, AMC, Dollar, USDCAD and EURUSD Talking Points:
- On the verge of a bearish risk reversal and Dollar recovery, the Friday NFPs data managed to maintain growth forecasts and cool Fed taper speculation
- With the next FOMC rate decision on Wednesday June 16th, any plan to steer rate expectations by the Fed will need to happen Monday and Tuesday before Thursday’s CPI
- Outside the influences of risk trends and US monetary policy speculation; on tap this week, we have: China trade; the BOC and ECB rate decisions, South Africa 1Q GDP and more
Pressure on ‘Risk Trends’ to Start the Week
US indices were on the verge of a bearish reversal and the Dollar a critical rebound after months of suppression…that is until the May NFPs hit the wires. Employment data from the world’s largest economy managed to thread the needle of both disappointing enough to throttle taper expectations for the Fed while still backing a view that the growth is on a remarkably robust pace. Of course, that interpretation will not be particularly easy to carry through into a full-scale trend when the market continues to struggle for a sense of conviction. Through the volatility of this past week, there remains a lack of full commitment across the financial system behind a view of sentiment or any other systemic perspective. That is what I will try to remind myself of as we wade back into active trade Monday. With the late-in-the-week rebound from the likes of the S&P 500, the benchmark is within easy reach of a record high. That will bolster bulls’ confidence and perhaps spur a technical break early on. On the other hand, the foundations for conviction remain out of reach. If there is a break early on in the week ahead, it is worth remaining a skeptic of the intentions after the break.
Chart of the S&P 500 with 20 and 100-DMAs, 1-Day Rate of Change and Overlaid with VIX (Daily)
Chart Created on Tradingview Platform
I find the S&P 500 and its peers are more robust reflection of market-wide sentiment, but those looking for the finer measurements of speculative appetite would do well to watch the top volatility representatives for clues that precede the systemic developments. There is no more prominent a benchmark for the influence of retail appetite than meme stocks and AMC in particular. The cinema operator was up as much as 173 percent this past week before settling at a ‘mere’ 83 percent gain over the period. That may seem an extraordinary performance under any other circumstance; but with the backdrop of concentrated speculative appetite and leverage, the pullback is troubling. The retail influence in this move is difficult to miss and the group’s lack of commitment to the long-term is notorious. There may be yet another wave of speculative indulgence ahead for the ticker, but ‘diamond hands’…
Read More: S&P 500 Record and Dollar Recovery to Lean on Fed Speculation This Week