Market Briefing For Tuesday, May 30 '23

Transformation vs. bifurcation might describe the market ahead of holiday festivities; with many confounded (especially the bears) by the S&P resilience. Debt-Ceiling 'deal watch' is still active; as nothing achieved before the Close.

I note this is the 5th straight week of Nasdaq gains; led by AI-related stocks a good bit due to what I termed weeks ago as an overriding 'new AI era' being investors focus; thus relegating the Fed and Debt Ceiling to 2nd place stance.

This PR gesture about 'extending' a Debt deadline to June 5th was stated last Tuesday; and while yes they can, there's no  assurance  Fitch or Moody's/S&P will wait that long before downgrading US AAA debt to AA+ regardless. Let's be realistic; there's little particularly righteous coming from either side now.

The market leadership has been lopsided for sure; but earnings are notably a bit higher than more restrained or bearish expectations; so not as much out of line that many contend. But yes, the breadth is far more negative than overall impressions such as what the S&P and NDX give.

We just don't think one should extrapolate too much; because substantive 'if brief' gains should be looked for if the broad list and thus 'majority' of S&P do join the tech and AI participants which have dominated the superficial upside.

In sum: this brief pre-holiday report expects a surprise upside into Summer; at the same time we suspect a profit-taking or corrective wave 'briefly' after a hot response to finally getting a Debt Ceiling deal.

Again nobody cares (well, until they do) about interest rates or a Fed monetary policy that the market fights; which is secondary, at least as presently viewed, although again the broad market has responded to the Fed restraint policies more than Indexes. We have believed for weeks that this was a 'new era' .. the AI era .. and that's why the S&P didn't stumble like so many anticipated.

These couple weeks have seen more FOMO among bears ... remember the crowd calling for catastrophe or the worst event in modern or world history? I said it was all nonsense and based on marketing, not market analysis; and at this point I'd say that -while this market's tough for everyone- it was entirely irresponsible for some media or online trying to scare people unnecessarily.

I'm not trying to provide a 'security blanket' about markets; and even with AI there are risks including 'networking risks' and 'cyber-hacking or terrorism' of course. But the bears extolling risks didn't focus on that ... they were talking of a 'crash', while our point was we already had a crash - last year in the broad market, with an 'inverse head & shoulders' bottom completed in October.

For sure it's been rocky and many stocks aren't participating; but clearly we're not having a catastrophe, there's no new crash, and the market isn't exactly in a fight with the Fed, although it looks that way because of how a few stocks in the S&P (biggest-caps) have led the upside, with breadth mostly mediocre.

So 'if' (and we should) have a Debt Deal by Tuesday's opening (or else there is obviously something different happening); and 'if' there's newer movements towards ending the War that would help; as would a new Russian Revolution (there is actually talk of the 'free Russia' militias triggering a broader upset of the Putin regime; and hopefully not so the Wagner mercenaries can walk in). I cross fingers when hearing rumors of Wagner having been so beaten that no way can they proceed and will just try to humiliate Moscow's Army and retreat to where they really make their money, which is supporting African dictators

Bottom line: 'debt and bank crisis' remain percolating; but usually you don't get market accidents when the major destabilizing events are known, rather than unknown. That's been part of this psychology too; besides AI revolution you have fear of the Fed hiking again in June (which is crazy and won't help) regardless of whether the can tack the inflation rate to the funds rate and thus justify such higher levels. But you'd break the economy into even great social disparity if they do that; even though they proclaim it's all 'for the people'. Not.

I won't do a special comment - barring truly shocking events - before Tuesday. In a sense it will be obvious if there is or is not a Debt Ceiling accord by the; and the market's initial response would superficially conform to resolution or lack.

I wish you a good holiday weekend; personally I look forward to some rest as this 'aggressive neutrality' has perpetuated 'tension on the tape' for some time (and that should come to an end). Now Sec'y. Yellen says 'Default' deadline is delayed until June 5. I suspect nothing has changed other than there are no deals yet; you have a holiday weekend; plus they need about 3 days in DC to get anything passed,  so, sure; they needed to buy 4 extra days to sort it out.

I mentioned at the outset this isn't news; plus the credit rating agencies may not be so tolerant of what is Congressional action several 'months' tardy.

Enjoy the holiday!

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Market Briefing For Thursday, May 25 '23
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This is an excerpt from Gene Inger's Daily Briefing, which typically includes one or two videos as well as more charts and analyses. You can subscribe for   more

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