Stocks whipsawed throughout the holiday-shortened trading week as investors digested the aftermath of the frothy SpaceX IPO, the first Fed meeting under new Chair Kevin Warsh, and the preliminary peace deal in the Middle East.
MACROECONOMIC UPDATE
- The National Association of Home Builders (NAHB) Housing Market Index dropped 2 points to 35. A reading below 50 indicates that the majority of builders are pessimistic about the current and near-term outlook for housing.
- Housing Starts came in far below economist expectations as they fell -15.4% in May, plummeting to a new 6-year low (see Market Insight). At the same time, Building Permits ticked down -0.7%. This indicates that housing construction is likely to continue slowing.
- The Pending Home Sales Index for existing homes rose +3.8% in May but remained subdued, staying in the dismal range of the last few years.
The releases this week all reflect the same story: a stagnant housing market struggling to make any meaningful positive headway.
TECHNICAL UPDATE
- Bearish Distribution in the InvesTech Negative Leadership Composite (NLC) moved to -6.4 after dissipating slightly earlier in the week. If market leadership continues to deteriorate, it would indicate that the broader market is heading for trouble.
- Margin Debt shot up in May to a new all-time high, a major warning that speculation and leverage have reached dangerous extremes (see Market Insight).
INVESTECH MODEL FUND PORTFOLIO
There are no changes to the Model Fund Portfolio this week, which is comprised of 56.5% long positions, 5% in an inverse index ETF, 5% in an intermediate Treasury ETF, and 33.5% cash held in short-term Treasurys or a money market fund. This results in 51.5% net equity exposure.
Latest issue of InvesTech Research published yesterday!
This latest issue of InvesTech Research reveals the historical importance of IPO frenzies and what SpaceX buyers might expect ahead. We also examine the broad market risks present today and identify what to watch as the striking differential between extreme sector risk and potential opportunity reaches new levels.