Market Daily Review: June 18/2020
A line has been drawn in the sand between the Bulls and the Bears. After last week's late sell-off (discussed in last week's blog), there seems to be a nervous calm in the U.S. equities. Here are some key events that have affected the market this week.
Retail sales
U.S. retail and food services sales for the month of May 2020 show $485.5 billion (adjusted for seasonal variation and holidays). That's an increase of +17.7 percent from the prior month. However, looking back in May 2019, it was about 6% lower.
May Industrial production
Increased +1.4% M/M to 92.6 vs. +2.9% consensus. Previous it was -12.5%
Housing market
May and June's 2020 housing market is seeing an uptick which correlates with the record-low mortgage rates and the re-opening of the economy. Housing starts grew from 891,000 to 974,000, which is a +9.31% increase from May to June. Building permits came increased from 1,074,000 to 1,222,000. All this was reflected in a rebound in the NAHB index. https://www.calculatedriskblog.com/2020/06/nahb-builder-confidence-increased-to-58.html
Returning to the Skies
TAS has compiled daily and weekly travel numbers and all indication shows that travelers are returning to the skies. Since late April 2020, traveler throughput grew from sub-100,000 to 544,046. That is a quadrupled growth since the lows of April 2020. However, that still pales in comparison to last year's tick count of 2,642,083 travelers. That is a decline of 74% from 2019 to 2020.
https://www.tsa.gov/coronavirus/passenger-throughput
These are clear signs that the above news is certainly positive for the economy. Certainly, we are not out of the clear yet. The economy is slowly re-opening and any surge in COVID-19 can derail the good news. We need to see additional data in the next coming months to confirm the uptick. The V-shaped recovery seems to be unlikely.
Unemployment Rate
According to the monthly employment rate (UER) as published by the BLS, the rate for May 2020 was sitting at around 13.3%. That is a drop from 14.7% high in April 2020. These numbers are still very high as compare to the past 2 recessions.
BullGap's Recession Index
BullGap's recession index (BRI) is shown below. It has already peaked into 157.96 which indicates a Recession is indeed upon the US economy. For the past 7 US recessions, whenever the BRI rose above 80, a recession has been forecast.
Onto the Market
U.S markets seem to be at an inflection point. This week, indexes were evenly mixed between the bulls and the bears. This consolidation can be seen in today's view from MoguUp's "Market Daily".
The big takeaway here from the screenshot below is that the trend for the major ETF indices such as SPY, QQQ, DIA, and IWM has shown a bearish daily downtrend. However, bonds such as TLT ETF was up today and has issued a bull signal on 6/11/2020.
Consolidation is the keyword for this week. As you can see from the screenshot of SPY below, Tuesdays saw prices gapped high on solid retail sales news. Since then, prices have been fluctuating between a low of 296 to a high of 310. This pattern can be seen with all major ETF indexes.
Right now, it looks like SPY is finding it difficult to break above last week's high of 323.41.
The market is indeed at an inflection point. The next move up or down can be telling as to whether we are in a Bear Trap or start of a new Bull Market. Last week, the Fed certainly ante up when they bought $100 billion of assets to support the market. That volume of purchase has not done much to this week's momentum in the market. Only time will tell as to where this market is headed.