Price action
QQQ was weak on Tuesday and Wednesday. Selling picked up on Thursday before rapidly accelerating on Friday morning. QQQ dropped -2ATRs through key support c449.5 and almost reached the 50dma. After negative news relating to NVDA on Thursday, plus weak earnings from CRM, DELL, and MRVL, plus a weak Chicago PMI, thing were looking dicey. However, month end buyers arrived in the final hour of the Friday session, driving a spectacular surge back above 449.5.
The Fed
Fed speakers continued their higher for longer message:
Kashkari (Tue): no hurry to cut, Fed could potentially hike if necessary.
Kashkari (Wed): can stay on hold for an indefinite period, wouldn’t pencil in more than two cuts this year.
Williams (Thu): dearth of progress on inflation, no urgency to act, rate hikes not baseline.
Bostic (Thu): inflation likely to come down slowly.
Logan (Thu): disinflationary path will be bumpy, too soon to think about cuts.
The Fed has now gone into blackout mode ahead of the next FOMC meeting on Jun 11-12. In the absence of Fed speakers, look out for steers via Nick Timiraos (WSJ) and Jenna Smialek (NYT).
What did we learn about markets?
Friday’s selling appeared to accelerate after the release of the Chicago PMI at 0945, which printed a very weak 35.4 v 41.0 expected. We shouldn’t put too much weight on one observation, but maybe QQQ is becoming more sensitive to weak activity data? Next week’s releases (ISM-M, ISM-NM, and NFPs) will show us whether this was the beginning of something new.
Breadth
The incipient negative breadth divergence that we noted last week eased a little, which is constructive.
McClellan Summation Index is still dropping…
…but, % of stocks above 40dma improved a little…
…and, New Lows eased off on both Nasdaq and NYSE.
Sentiment
Sentiment cooled somewhat from elevated bullish levels.
AAII Bulls dropped -8pts to 39%
The put call ratio 5dma has lifted from very low levels:
Seasonality
A bullish take from Marlin_Capital about election years:
Summary
QQQ was weak Tue-Fri midday, but strong month-end buying pushed QQQ back above the key 449.5 level. The primary trend remains bullish.
Fed speakers maintained their higher for longer message. The Fed has entered a blackout period until its Jun 11-12 meeting.
An emerging negative breadth divergence stabilised.
Sentiment cooled slightly.
Key events next week: Mon - ISM-M, Tue - JOLTS, Wed - ISM-NM, Fri - NFPs.
PS, an explainer for the weekly slide can be found here: