What fascinates me right now is the injection of liquidity by the Fed, which of course, is not being called by its rightful name: Quantitative Easing.
That leads me to think, what else can we buy now that hasn’t been crowded by the FOMO crowd?
As you can see in the Bloomberg chart, cause/effect for tech and many different sectors begging for the Fed fix.
The Economic Modern Family, though, has many other issues.
As the 1st quarter ended, only Semiconductors closed above the 2-year or 23-month business cycle to show expansion.
The rest of the Family did not, and Retail and Regional Banks still way underperform.
This could mean more QE on the way, and the rest of the indexes and key sectors follow SMH, or it could mean a wake-up call for the 2nd quarter.
Either way, we still believe that most are #lookingforinflationinallthewrongplaces.
Sure, the market loves the liquidity to save any future bank issues. Everything the Fed does, as we well know, has a cost.
Last week, I wrote about agricultural commodities and DBA, the Agriculture ETF. Since that Daily, DBA has risen over 4%.
So, what should we look for next? I wrote about long bonds (iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT)).
TLTs rallied with the market. The good news is that long bonds are underperforming SPY, which is risk on.
If yields fall further, will that be good for the market when the Fed suddenly has to become more aggressive again to control rising inflation?
Haven’t we learned yet that the more “QE,” the more spending, the more inflation, and so on?
So, watch the bonds. Consider the grains. And since the PCE released Friday excludes food and energy, keep track of precious metals, sugar, and crude oil.
Our quants have not gotten into oil yet-so from a macro perspective, over $82, we are interested.
Look for momentum to clear the 50-DMA along with the price. Then, the risk will be minimal, and the reward substantially great.
And so will be the cost to the economy.
ETF Summary
- S&P 500 (SPY) 405-410 back in focus
- Russell 2000 (IWM) 170 support- 180 resistance still
- Dow (DIA) Needs a second close over 332
- Nasdaq (QQQ) 329 the 23-month moving average-huge
- Regional banks (KRE) Weekly price action more inside the range of the last 2 weeks-still looks weak
- Semiconductors (SMH) And she’s off-255 key support 270 resistance
- Transportation (IYT) Cleared the weekly moving average so now has to hold 225.
- Biotechnology (IBB) Good performance but not enough yet unless clears 130 area
- Retail (XRT) Ran right to big resistance at 64