Low volatility, US dollar, tech 'super boom': Market Takeaways

Yahoo

5 days ago

Yahoo Finance Markets and Data Editor Jared Blikre joins Asking for a Trend with Josh Lipton to take a look at the biggest takeaways from Friday's trading session: the trend of low volatility, the US dollar (DX-Y.NYB) driving markets more than crypto or commodities, and the tech sector "super boom."
To hear more about the tech super boom, watch Jared's full Stocks in Translation interview with Stock Trader's Almanac editor in chief Jeffrey Hirsch here.
To watch more expert insights and analysis on the latest market action, check out more Asking for a Trend here.
in this bull market, we are seeing a lot of low volatility days, and that's what we're seeing right here, melt up. And I will show you the week's action in the S&P 500 just to reiterate what we saw after the closing bell. And by the way, let's just start with the sector action. All 11 sectors for these five days in the green. Interestingly, healthcare led. You don't see that very often, at least not lately. Then materials, industrials, real estate, financials, so an interesting mix, mostly cyclicals in there, but also the one defensive, which is healthcare. Tech the laggard. And you got to think what's going to happen next week once we have all those big tech earnings, but uh, we'll leave that for next week. And let's just check out the S&P 500 over these five days, and there are fresh records every single day, up 1.5%, and I was sitting down with Jeff Hirsch of the Stock Traders Almanac. We're going to listen to him in a couple of minutes here, but I just wanted to add, when we have a low volatility period, and it's been almost 20 days now, when you get a break to the upside out of that, you usually see more upside. So, but if you get a break to the downside, well, you usually get more downside. So, whenever we break this low volatility spread, that's going to be top of mind for me, and it's probably going to take you, uh, it's going to be an indication of where the next part of the rally or the decline goes.
What has been the big driver of the markets outside of stocks?
It has been the dollar over the last 24 hours or so, and this was really interesting because I was watching that press conference, it wasn't really a press conference. President Trump was walking around the Fed building with Chair Powell, and there's a little bit of drama there, but the dollar was heading higher after that. And that's just based on some of the headlines that came out of the meeting that Trump is not going to replace Powell, at least for the time being. And so we saw this, it kind of melted up overnight, and the net result is over the last two days it was up about 33 basis points. Doesn't seem like a lot, but in currency terms, it's not nothing. And I'm not ascribing all of the downside in commodities and crypto to it. And let me just put the futures board on there, but I think it was, uh, it was definitely a factor. And so here's our commodities board, more red than green, looks like softs leading the way down, OJ and also coffee down the most, but also silver, palladium, and then sugar. And then looking at crypto, I'm not going to spend a lot of time on this, but Bitcoin kind of slid down below some support. Let me put the year to date on this so I can chart this for you. Here we go. So we did have a little bit of a range here, a break of the range, but in the big picture, you're to date, just barely looks like a blip on your screen there.
We keep hearing, Jared, of a skinny bull, a skinny bull with low breath. What do we mean by that?
Well, let's take a look at the tech super boom and, or think about it. And here's where I want to call out that Jeffrey Hirsch clip that we have prepared, sat down with us on Stocks and Translation. He's, of course, the editor of the Stock Traders Almanac, so he's very much into seasonality, but separately, he also tracks some of these super cycles, and these are multi-year cycles, sometimes multi-decadal cycles that we see in some different markets, especially tech-driven. Let's take a listen.
This is all part of our longer-term outlook of what we call the super boom, um, which is based upon, uh, you know, inflation and in the end of more like peace time, and also, uh, technology. Culturally, what I call a culturally enabling paradigm shifting technology. This is something that Yale discovered back in the '70s where we see these moves after these postwar periods of 500% or more. Um, we came out with this in 2010, this forecast for Dow 38,820 when it was about 10,000.
All right, so getting, getting back to your question, what is, what's with this skinny bull market? It's true. We've had less than half of the S&P 500 stocks really participating year-to-date. You're not seeing, uh, you're not seeing these wild, uh, bullishly internal stats like 70% above their 200-day moving average. And then you take a look at the smaller caps, and here's what I have on the screen here. I'm comparing the MAG 7 to the IWM, which is Russell 2000 ETF since the election. So basically since November 5th. And the Russell 2000 here is break even. Uh, it's barely been able to hold its water here. And of course, there's a big decline and it declined more than MAG 7, but here's the MAG 7, they're only back up to their highs. And even the MAG 7 are kind of struggling it seems to carry the market. The MAG 7 have really become Nvidia and Microsoft. Those have been the biggest two drivers. And I want to show you something else here, and I'm going to wrap this all up after a few more charts. Here's Ark Innovation Fund versus IShares Russell 2000 ETF. And you can see it has just rocketed past these old highs here. And so, and then here's Bitcoin versus small caps. And this is up even more, 68% versus a break even. So where is the strength coming from? You're not seeing it in the middle of the market. You're seeing it from some of the big players and then a bunch of fringey places like innovation, like disruption, like crypto and all these other smaller place. And we also meme stocks. I mean, we just did an entire segment or you just did an entire segment on it. That's where we're seeing the money flow. So you put it all together, there's a vast swath of stocks that are not participating here, but things look good if you're in the right places or if you're just in the major indices and you don't mind watching things go up just a little bit every day.
Finally, what's on the Jared Blikre radar for next week?
You know, I am interested in some of these big tech earnings. I do want to see what happens with Apple. I'm not counting Apple out by any means. Some of the others as well, but I also want to focus on the dollar. I'm going to see if it continues its ascent because Monday morning, I'm going to do, I'm going to show, I'm going to do August seasonality and we can talk about this too. Dollar typically rises at this point in the year, so that could be a contrary trade. And then meme stocks and all this fringey stuff I've been talking about. That's what I'm going to watch.
A lot on deck. Thank you, buddy. Appreciate it.
Later.