So Close, Yet So Far

Equities start the day higher as new highs remain tantalizingly close. Remember when you were a kid and that Transformer toy on the top shelf was JUST within your reach yet you couldn’t grab it? Yea that’s where we are right now, so close yet so far. Actually, since I just alienated half my audience, let me rephrase that opening sentence. Remember when that video game on Amazon was just a bit too expensive and you were waiting for that flash sale so you could spend your bitcoins on it? Yea that’s where we are right now. New highs in $SPX are less than a percent away and it has everyone asking this question: What is the catalyst? Well my friends I’m here to tell you that there IS NO CATALYST, there is no single event / story / headline that will take us there. Instead we are brewing a cocktail of all the following: 1) Positioning. Tons of money has left the market in search of some kind of promised land (BAC thinks it’s about $60B) and that money may be remorseful soon. 2) Rotation. Energy / Materials / Financials, all the things you want to see leading are leading. This isn’t a utility based rally, people are actually buying the stuff that moves. 3) Fed punting. June is at 0% and July isn’t far behind, plus we have no Fed speakers until the next meeting so we won’t have to worry about hawks hawking. New highs are going to sneak up on people and by the time they notice the market will be racing like Secretariat. What do you think a breakout is going to look like given we’ve been at these levels for about a year and half? Here’s a hint: it won’t be calm. This tape won’t let people jump into new highs easily, it is going to GO. Anyway, the disbelief is real, don’t discount that. Everywhere you look it pervades sentiment and that will be a powerful force once it reverses.  

After the open we spent the first half of the day slowly moving higher. Inch by Inch, tick by tick it found its way to the 2,118 level where we paused. Why the grind? Well Europe had a decent session, up 1-2%, and oil managed to secure the $50.25 area. Recall that energy earnings stabilizing is part of the base case for new highs so we definitely need oil to remain here. Not a lot of economic data to speak of, just unit labor costs and nonfarm productivity but you have to be a real economic hipster to care about those. The biggest winners were energy stocks as you might imagine, stuff like EOG, NFX, MRO, APA, and COG (FFIV led all winners because they were said to hire advisers on takeover interests). Losers were health care names like BIIB, ALXN, and VRX, each with their own little soup bowl of misery. By lunch we were wondering if the rally would hold because momentum felt like it was fading out (like my interest in going to Whole Foods, watching Silicon Valley, and wearing salmon colored pants).

The afternoon saw a small selloff and a close around 2,112, up a measly 10bps on the day. Quiet session too, volume was way below normal. Now before we can enjoy all this “chasing” I’ve been talking about I feel like we have to get by the Fed Meeting and this whole EU Referendum my friends across the pond have decided to engage in. Could it happen before then? Sure, I guess, but it seems unlikely to me. Those are fairly sizeable speedbumps down the road so I doubt we can go full Vin Diesel until they are behind us. Anyway, here we sit, watching and waiting like Ramsay Bolton for the Starks. How much do we want to wager that Ghost kills him? I’ll make it even money (Jon 5 to 1  / Sansa 3 to 1). 

Final Score: Dow +10bps, S&P500 +13bps, Nasdaq -14bps, Rus2k +26bps. 

Volume was low. Our desk was evenly matched. Buying in Energy and Industrials. Selling in Financials and Truckers. Shorting in Index ETFs. News Highlights:

So apparently some guy named Kimbo Slice died today (RIP).   I checked out some of his Youtube videos and he seems like a real beast! Check out this football hit:

Have a good night.