Both the S&P 500 and the Nasdaq have closed lower every day this week so far as rising prices and concerns regarding AI profitability weighed on markets.
MACROECONOMIC UPDATE
- New Home Sales plunged -7.3% in May as the housing market continues to struggle.
- The Personal Consumption Expenditures (PCE) Price Index moved higher in its latest release as the overall annual rate moved to 4.1% – more than double the Fed’s 2% target. Core PCE, which removes volatile food and energy components, also increased – rising 3.4% year-over-year (see Market Insight).
- The final reading for Consumer Sentiment in June was essentially unchanged from the preliminary reading at 49.5. While above its recent all-time low, the Index remains historically depressed. Consumers continue to be extremely concerned about the high cost of living and inflation expectations remain elevated at 4.6%.
TECHNICAL UPDATE
- Bearish Distribution in the InvesTech Negative Leadership Composite (NLC) moved to -14 as market leadership deteriorated further. If Distribution continues to build, it will be an important signal that major indexes are losing leadership support, and further downside likely lies ahead.
- The InvesTech Gorilla Index fell substantially this week and now sits more than -15% below its October peak. If the Index breaks below its recent low, it would warn that these (former) market leaders are no longer a source of strength and danger is looming.
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.