Stocks finished higher after a nice drift session. Basically, after the S&P 500 gapped higher on the opening, nothing happened all day. The index finished up by 58 bps, to close at 4,266. There was nothing magical yesterday, it was just flat out boring, and it seems that nothing is driving this market up without the pump futures.
One reason why I think the S&P 500 has stalled is that earnings revisions have slowed dramatically. Meanwhile, the index itself has been trading between 20 and 21 times earnings estimates since May of last year, so unless we are about to get a lot of multiple expansion, it will take increased earnings estimates to drive equities higher. Perhaps earnings estimates pick up in pace once second-quarter results are over, but there is, of course, the big risk that estimates start to get revised lower too.
This is the biggest reason we have just stalled for the most part and likely to be more range-bound than anything over the next month or so. It likely means the market will continue to rotate between reflation sectors and technology sectors, and back and forth, buying the dip on one and selling the rip on the other.
Breakeven inflation rates moved lower again, back to 2.3% today. The divergence between the S&P 500 and the breakevens is fairly wide now. Perhaps the correlation is breaking down, perhaps it isn’t, but I’m not sure how much longer this can last either.
Amazon (NASDAQ:AMZN) was in sell the rip mode, with the stock getting to the upper end of the range at 3,500 and now moving lower, a move back to $3,350 seems possible.
Micron Technology (NASDAQ:MU) has rallied the past two days, and it comes to an inflection point, with the downtrend and resistance around $81. We will have to see what happens now; if it can clear the downtrend, the bearish betting I saw in the stock was wrong, and it can climb back to $86. If not, then it will probably head lower to $74. I don’t know at this point.
ACADIA Pharmaceuticals (NASDAQ:ACAD) has dipped lower for a few sessions after that big move up off the lows. I’m just hoping there is a bullish cup and handle pattern that is forming.