Monday's Market Minute: When The Fireworks Are Over, And The Smoke Clears…

As we embark on the first full trading week of July, let’s analyze a few trends present throughout this spring and summer. The /NQ has rallied from its March spike low of 6628.75 to new all-time highs above 10500. The trend up has come as multiple tech names – the leaders of the /NQ – have been beneficiaries of shut-in restrictions. Keep an eye on the /NQ as it – in addition to the FANG names – has been leading the broader market higher as well. The move up is a reflection of investor sentiment and expectations for economic conditions to continue to improve, and the potential for more stimulus if they don’t.

Next, the trend in energies – crude product specifically. The move from single digits to above 41 dollars in the WTI recently is a sign investors and traders alike think economic conditions will improve as shut-in restrictions get lifted. The trend up from the lows earlier this spring also is a sign that investors expect the production side to remain somewhat muted for some time as OPEC compliance improves and U.S. shale producers dial back significantly as well.

But these aren’t the only trends: Gold has been moving higher – last week to above 1800 for the first time since the spring of 2013 – since it traded above 1400 back in July of last year. Copper is also trending higher and providing signs that investors think conditions will improve. No matter how you slice it, the trends we’ve seen across markets suggest investors are willing to take on risk and expect conditions to gradually improve. Lastly, this optimism stems from two well-defined trends we should continue to watch: if they shift, it could mean a major shift in investors’ sentiment.

First, the trend we’ve seen with improving economic data – most recently a robust jobs report last week when Non-Farm Payrolls topped 4M. Second, the trend we seen from lawmakers and the Fed; they want to stimulate the economy during the tough times to help us through. The Fed has been clear: the burden is not on them alone. We need lawmakers to step up, and the expectations are that they will. We’re already hearing talk of an infrastructure stimulus package that is gaining bipartisan support, but we may have to wait. While we do, watch the trends noted above and remember the “trend is your friend” — and identifying when they are changing is key as well.

Photo by Xan Griffin on Unsplash