Fearless Bulls vs. the Fed: What’s on Tap June 12-16, 2023


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Week in Review: The Small Caps Come Back

(data as of 2:03 p.m. Friday)

The big story this week was the surge in the Russell 2000, which jumped 1.7% to outperform the other major index ETFs.

The bears have argued that the rally has been too tech-heavy, so it's good to see other small caps get in the game.

We also saw RSP, the equal-weight S&P 500 ETF, outperform SPY, which is heavily influenced by a few large-cap tech stocks like Microsoft (MSFT) and Apple (AAPL).

You can see that in this chart:

The S&P 500's rally also pushed it 20% over the October 2022 low, so we are in a bull market -- if you believe in that textbook definition.

The June Surge

Now let's take a quick look at ETF performance in June. As you can see, just about everything is up:

The 2023 rally is broadening out with energy, financials, airlines, and small caps catching up to the soaring tech stock.

Meanwhile... complacency may be setting in.

Fear Does Not Exist in This Market, Does It?

The VIX is back at February 2020 levels, showing that traders expect almost no volatility:

Meanwhile, the American Association of Individual Investors' Sentiment Survey showed a surge in bullish sentiment:

44.5% of investors are bullish, a big jump from last week's 29.1% reading.

This is the highest reading since November 11, 2021. The S&P 500 topped out less than 2 months after that.

Plus, CNN's Fear and Greed Index reads Extreme Greed:

Add it up and it's obvious that traders are bullish.

I'm not saying this is right or wrong - I'm just showing you the data.

The Fed Is Dead Ahead

It's a big week for US economics:

  • Tuesday: Consumer Price Index
  • Wednesday: FOMC Rate Decision & Press Conference, PPI
  • Thursday: Retail Sales, Jobless Claims, Philly Fed, NY Empire State Manufacturing, Industrial Production
  • Friday: Michigan Sentiment

All eyes are on the CPI Tuesday and the Fed Wednesday.

We all want to see if the Fed's really going to just hike 25 bps and pause.

Of course, if Powell shakes things up, the bulls may run into a brick wall.

Because based on the action in tech and housing stocks, it seems like the market's pricing in 

Some Earnings Biggies

The earnings calendar is almost empty but there are 4 important reports hitting:

  • Monday: Oracle (ORCL) - will give us insights into enterprise tech spending (and possibly AI trends).
  • Wednesday: Lennar (LEN) - homebuilding stocks are up huge in 2023 despite a lousy housing market so we'll get more insights.
  • Thursday: Kroger (KR) - will tell us about food inflation.
  • Friday: Adobe (ADBE) - has been releasing amazing AI tech and we'll see if people are buying

The Best ETFs of 2023 - Semis Still RULE

Even though small caps played some catch-up this week, big-cap tech is still on stop with semiconductors up nearly 45% YTD:

And who would have thought housing (ITB) would be up 30% in a bear market.

Factoid of the Week: The Mighty Carvana Short Squeeze

We're awarding Carvana (CNVA) the "Short Squeeze of the Year" Award.

It has 45% short interest... and it's up 306% year-to-date at $19.26.

Only 3 of 27 analysts rate it a buy.

And the average target price is just $13.

There's a parallel here with housing stocks.

Everyone knew housing was slowing the same way everyone knew the weak used car market would hurt Carvana.

Turns out, when everyone knows something, it can be time to buy.

Easier said than done... but keep that thought in your head.

Trading Advice from Robert Deniro

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