4th of July Fireworks

Watching the Charts…

It has been a quiet couple of weeks but we did get some inflation data on Friday with the Personal Consumption Expenditures (PCE) Price Index for May and it came in as expected at 2.6% which was no surprise. Next week, we will get the jobs numbers after the July 4th holiday in another shortened trading week.

The markets have been listless as we enter the summer months but we will begin to see earnings reports for Q2 in July and investors will get another gut-check on the economy’s growth prospects. The technology sector will also be evaluating the progress on artificial intelligence and how companies are monetizing this capital upgrade cycle.

There is not much to discuss until we see Q2 earnings reports so here are a few charts for you to review before the fireworks begin next week.

Some Charts…..

First up is the S&P 500. You can see below this index continues to trade up and to the right, however, the last two weeks show a consolidation as there is an overbought condition on the Relative Strength Index (RSI) at the bottom of this chart. Momentum is still to the upside but some additional consolidation (sideways trading) may be in store until we see the Q2 earnings reports.

A main driver of the major indices is technology and more specifically the semiconductor stocks which are at the heart of the artificial intelligence trade. The SOXX ETF below owns this sector and you can see has strong momentum. Again, we may see some consolidation before earnings but we did see Micron report some good numbers this week.

Now we have the yield of the 10Yr Treasury bond which looks to be on its way below 4% as inflation expectations are pointed lower. Longer term, we will likely see 10Yrs above 5% but I don’t expect that until 2025 or later.

Finally, we have the price of Gold (GLD ETF) and we can see that prices made a peak in July of 2020 and consolidated for 3.5 years. For now, gold is breaking out and it looks like this could last for some time. Perhaps, inflation expectations will turn higher if the economy begins to strengthen and interest rates turn higher maybe next year. For now, the trend in gold is higher.

Paul McCarthy of Kisco Capital, LLC

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Paul J McCarthy III

President, Kisco Capital

Paul McCarthy

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