S&P 500 Futures

Oversold to Overbought

The S&P 500 had its best weekly performance since February (+2%). As I mentioned in last weeks post (Another Fed Hiccup), the S&P was near a bottom after selling off in reaction to the Fed’s latest policy decision mid-month. The rebound continued into the close on Friday and demonstrates the strength of the market amid low interest rates ample liquidity.

In the chart of the S&P 500 below, we have gone from oversold to overbought in one week as we found a bottom on June 20th at 4127. Despite the momentum indicators showing an overbought condition, this may not indicate a top. In a strong uptrend, the RSI (Relative Strength Index) can get pinned in the overbought position for some time. We may be in store for a small pullback early next week but this uptrend does not look finished to me right now.

Chart of the Week!

Economic & Central Banking Snippets 

Existing Home Sales
  • U.S. home prices in May were nearly 24% higher than a year earlier—the biggest annual increase in more than two decades. The median existing-home sales price in May topped $350,000 for the first time. The price increase and a shortage of homes on the market are contributing to a slowdown in the pace of home sales. (WSJ)
  • However, new home sales in May totaled 769k which is about 100k less than expected and April was revised down by 56k to 817k. That is the slowest pace of sales since May of 2020.
  • High property prices around the world are putting pressure on central bankers to tighten monetary policy to keep inflation in check even though the world economy’s recovery from the pandemic is far from complete, writes Jon Sindreu. (WSJ)
Property Prices since 2005
  • The Commerce Department reported that new orders for durable goods designed to last at least three years rose 2.3% in May from the previous month after falling 0.8% in April. Much of that increase came from new orders for civilian aircraft and parts. Orders for non-defense capital goods excluding aircraft, a proxy for business investment, fell 0.1% in May. Such orders had been up 2.7% in April. (WSJ)

Macro Snippets

  • Large U.S. banks performed well in their annual stress tests, paving the way for the lenders to boost their payouts to investors after June 30th.
  • Chinese junk bond yields jumped above 10% last week for the first time since the country’s May 2020 market turbulence, signaling growing concern about defaults.
  • Online retail sales for Amazon’s Prime Day totaled $11B according to Adobe Analytics data. Specifically, the data show that Amazon’s sales totaled $5.6 billion on Monday and $5.4 billion on Tuesday. $11 billion represents just 6.1% growth over last year’s Prime Day total of $10.4 billion. That’s a significant slowdown from the growth rates of previous Prime Days.
  • Many of those who do buy homes are turning to nontraditional lenders for financing. Nonbank mortgage lenders in the U.S. issued 68.1% of all mortgages originated in 2020, their highest market share on record.
  • The surge in e-commerce has led retailers and logistics companies to drive up the rents on scarce warehouse space as they try to move goods closer to buyers. First-year base rents in Northern New Jersey jumped by a third in May from the previous year. In Southern California’s Inland Empire, rents were up 24.1%. (WSJ)
  • So far, 2021 had 536 IPOs, the highest annual tally since the dotcom bubble, fueled by low interest rates, cash-rich venture capital markets and enthusiastic retail traders.
IPOs thru 2021

That is all for now and thank you for being a subscriber!

Paul J. McCarthy III


Paul J. McCarthy, III

President – Kisco Capital

Paul McCarthy

Mr. McCarthy is the President and founder of Kisco Capital.