US markets closed mixed as investors continue to rotate out of Growth and Tech into Value and Recovery stocks. The rotation continues as investors continue to worry about inflation which is seeing continued selling in bonds.
Oil came back strongly after reaching US $68 dollars a barrel. Copper remained weak but at higher levels as did most metals and Iron Ore overnight. Despite this Energy and Materials in the US continued to gain.
With the heavy selling in Bonds and the Tech space, money will need to flow somewhere. At this stage it is flowing toward the Value and Recovery space. So, think Financials, Miners, Energy, and Industrials.
The Stimulus is good for all sectors, but with the hope of the US economy reopening and the with many Tech stock way overbought the rotation continues. At some point though Tech will reach a level that will look attractive again. Consumer Discretionary could also far well with the $1400 cheques being sent out in the US.
The XJO is expected to experience another strong open this morning, putting us near roughly 6800 again. This will regain half the bullish movement we gave up yesterday by the close. The pull back was likely due to a combination of falls in Asia and U.S futures giving up all their positive gains. U.S futures sit in the green this morning.
With the U.S markets disconnecting as money shifts from typical growth, tech, stay-at-home to more value and cyclical stocks, expect our market to continue to be erratic.
Technically, we tried to break the pennant yesterday, but we pulled back inside of it. We still held the uptrend and the momentum seems to be picking up in a positive way though, so it is likely we see 6900 again sooner rather than later.
The AUD continues to sell off which will help our exporters, particularly our miners.
Friday’s optimism was quickly doused last night, with technology stocks continuing their recent selling. The NASDAQ 100 tech index is now down roughly 12 percent from its February all-time high, which means that it has experienced a technical correction. Markets are stilled buoyed by the massive US stimulus package, but the persistent strength in bond yields continues to weaken stocks that trade at very high valuations.
There was little in the way of economic reporting overnight, except for wholesale trade sales, which came in stronger than expected. Technology stocks were the weakest performers overnight, selling off heavily. Most other sectors performed well however, with every other sector except for Healthcare rising to some degree.