'So Far And So Fast': Stock Market Update For The Week Ahead

The Past Week, In A Nutshell

What Happened: “A sell-off had become inevitable because the market had come so far and so fast, and because it involved pricing for perfection,” said John Authers, a Bloomberg Opinion columnist.

Remember This: “Sooner or later we will get a real economic recovery and from that point the stocks that were thrown out will lead the market,” said Mike Lippert, portfolio manager at Baron Opportunity Fund.

Pictured: Profile chart of the S&P 500 E-mini Futures

Technical

Risk-off sentiment after equity indices erased an earlier gap that occurred on hopeful economic data. The island of balance left behind will offer resistance on any correction higher. If the market trades through that area, then sentiment has changed and the initiative activity that drove prices lower is no longer present.

Recapping last week’s action, Monday overnight traded to a low-volume area from Friday creating a ledge at $3,211 that the market later traded through, into the close. Prices above the ledge were rejected after Tuesday's overnight auctioned below the breakout point, to the resting liquidity at $3,190.

Wednesday's FOMC meeting officially ended the move higher as volatility increased and the market closed lower. Thursday displayed a rush from risk as selling was persistent and strong into the close.

Friday failed to generate continued selling below $3,000, closing above the $2,975 prior balance area and anchored VWAP.

Putting everything together, the picture points to the potential for a correction up to the coming Friday option expiration. If liquidation continues into the coming week and value moves lower, then the near-term bullish narrative is no longer intact.

Scroll to bottom of document for non-profile charts.

Key Events

New York Federal Reserve’s Business Conditions Index; Retail Sales; Initial Claims; Industrial Production; Housing Starts; Housing Permits; Philadelphia Federal Reserve’s Business Index; U.S. Current Account Deficit.

Fundamental

Short-term speculative derivatives activity results in more hedging, volatility.

COVID-19 coronavirus data may have not prompted recent selling.

Keeping unproductive companies around lowers long-run economic growth.

The Congressional Budget Office sees virus relief reaching $2.2 trillion this year.

U.S. gasoline consumption rebounds, led by removal of mobility restrictions.

May default volume brought YTD default volume to its highest since May 2009.

Coronavirus obliterated the best African-American job market on record.

Fed to buy as many bonds as necessary to keep yields at desired level.

After-tax profits for retail companies fell more than expected.

Apple Inc AAPL to stop using Intel Corporation INTC chips.

Incoming shift to digital may grow Amazon Inc’s AMZN AWS revenues.

The U.S. saw its largest decline in business owners between February and April.

BP plc BP to cut global workforce by 10,000.

Unrest and inequality pose fiscal and governance credit risks for states and cities.

Airlines unlikely to fully recover before 2023, face structural changes.

The U.S. consumer price index continues falling, sparks talk of deflation.

Flat yield curves are a key threat to bank margins as rates stay low for longer.

Hong Kong’s relief measures reduce pressure on bank asset quality.

New SEC rules on crowdfunding a boost to capital raising for startups.

Auctioneers race to unload oil equipment as drilling interest dries up.

Senators draft plan to reform new plane design approvals.

American Airlines Group Inc AAL to halt cash burn by year-end.

Goldman Sachs GS, Morgan Stanley MS downgrade Tesla Inc TSLA noting current valuation underestimates risks including increased competition.

The Fed expects household finances to suffer persistent fragilities due to shock.

U.S. consumer confidence rises while unemployment shadow lingers.

Fed Chair Powell is devoted to the return of a strong labor market.

Hertz Global Holdings Inc HTZ seizes on speculation with stock sale.

Sentiment is 34.3% Bullish, 27.7% Neutral, and 38.1% Bearish as of 6/14/2020.